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2019 (1) TMI 1604 - AT - Income TaxPenalty imposed u/s. 271-AAA - surrender of undisclosed income was made in view of various discrepancies found in the course of search - assessee failed to specify the manner in which the undisclosed income surrendered by him was earned - HELD THAT - As decided in PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) -I VERSUS SMT. RITU SINGAL 2018 (3) TMI 593 - DELHI HIGH COURT held that the income which was ultimately brought to tax pursuant to the disclosure made, which was voluntary on the part of the assessee is stating the obvious. The assessee merely stated that the sums advanced were undisclosed income. However, she did not specify how she derived that income and what head it fell in (rent, capital gain, professional or business income out of money lending, source of the money etc). Unless such facts are mentioned with some specificity, it cannot be said that the assessee has fulfilled the requirement that she, in her statement (u/s 132 (4)) substantiates the manner in which the undisclosed income was derived . Such being the case, this court is of opinion that the lower appellate authorities misdirected themselves in holding that the conditions in Section 271AAA (2) were satisfied by the assessee. - Decided in favour of revenue.
Issues Involved:
1. Confirmation of penalty imposed under Section 271AAA of the Income Tax Act. 2. Satisfaction of conditions for immunity from penalty under Section 271AAA(2). 3. Relevance of judicial precedents in similar cases. Detailed Analysis: 1. Confirmation of Penalty Imposed under Section 271AAA of the Income Tax Act: The appeal by the assessee challenges the confirmation of a penalty imposed under Section 271AAA of the IT Act. The penalty was levied following a search and seizure operation conducted on 31.07.2008, during which the assessee surrendered an undisclosed income of ?90 lakhs. The Assessing Officer (AO) imposed a penalty of ?9 lakhs, equivalent to 10% of the surrendered income, on the grounds that the assessee did not specify the manner in which the undisclosed income was derived. 2. Satisfaction of Conditions for Immunity from Penalty under Section 271AAA(2): The assessee argued that the surrender of income was voluntary, aimed at purchasing peace of mind and avoiding further litigation, with the condition that no penal action would be taken. The assessee contended that the conditions for immunity from penalty under Section 271AAA(2) were satisfied, as the surrendered income was admitted in the return and tax was paid thereon. However, the Tribunal noted that for immunity under Section 271AAA(2), the assessee must: - Admit the undisclosed income in a statement under Section 132(4). - Specify the manner in which such income was derived. - Substantiate the manner in which the undisclosed income was derived. - Pay the tax and interest on the undisclosed income. The Tribunal found that the assessee failed to specify and substantiate the manner in which the undisclosed income was derived, which is a crucial requirement under Section 271AAA(2). The Tribunal referred to the decision of the Hon'ble Jurisdictional High Court in the case of Pr. CIT vs. Smt. Ritu Singal, which emphasized the necessity of fulfilling all conditions under Section 271AAA(2) for immunity from penalty. 3. Relevance of Judicial Precedents in Similar Cases: The assessee relied on several judicial precedents where penalties under similar circumstances were deleted. These cases included decisions from the Tribunal and High Courts, which were cited to argue that the penalty should not be imposed. However, the Tribunal observed that the latest decision of the Hon'ble Jurisdictional High Court in Pr. CIT vs. Smt. Ritu Singal provided a comprehensive answer to the assessee's contentions. The High Court held that merely stating the undisclosed income without specifying and substantiating the manner of derivation does not satisfy the conditions for immunity under Section 271AAA(2). The Tribunal also referred to a similar decision in the case of ACIT vs. M/s. SSA International Ltd., where it was held that failure to specify and substantiate the manner of deriving undisclosed income disqualifies the assessee from immunity under Section 271AAA(2). Conclusion: The Tribunal concluded that the assessee failed to satisfy the conditions laid down in Section 271AAA(2) for immunity from penalty. The appeal was found devoid of merits and was dismissed. The Tribunal upheld the penalty imposed by the authorities below, emphasizing the necessity of specifying and substantiating the manner in which the undisclosed income was derived to qualify for immunity under Section 271AAA(2). The decision was pronounced in the open court on 28.01.2019.
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