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2016 (7) TMI 1008 - AT - Income TaxPenalty proceedings u/s. 271AAA - AO brought to tax the seized cash as income from undisclosed sources - Held that - In the case of Concrete Developers (2013 (11) TMI 1326 - ITAT NAGPUR) the Tribunal has held that where the assessee had disclosed certain amount during the course of search and had paid taxes thereon, filed return showing said income as business income and same had been accepted by the AO under the head business income , penalty u/s. 271 AAA was not leviable. In the case of Pramod Kumar Jain (2012 (12) TMI 629 - ITAT CUTTACK ), it has been held by the Tribunal that there was no prescribed method to indicate the manner in which income was generated. Considering the facts that the assessee had paid taxes on the undisclosed income and had stated the seized cash represented his professional income, we are of the opinion that no penalty is leviable u/s. 271AAA of the Act. In our opinion, the judgment delivered by the Hon ble Gujarat High Court in the case of Mahendra C. Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT ) support the view taken by the Tribunal in the above mentioned cases. So, reversing the order of the FAA, we decide effective ground of appeal in favour of the assessee .
Issues involved:
1. Tax treatment of seized cash as income from undisclosed sources. 2. Imposition of penalty under section 271AAA of the Act. Analysis: Issue 1: Tax treatment of seized cash as income from undisclosed sources The case involved a search and seizure action under section 132(1) of the Act carried out in the case of ISPAT Industries and group companies, where the assessee, working as President (Legal) of the group companies, had cash amounting to ?54.97 lakhs seized from bank lockers standing in his name. The Assessing Officer (AO) treated the seized cash as income from undisclosed sources in the assessment completed under section 143(3) of the Act, stating that the assessee failed to explain the sources of income of the seized cash. The AO also initiated penalty proceedings under section 271AAA of the Act. Issue 2: Imposition of penalty under section 271AAA of the Act During the penalty proceedings, the assessee argued that the seized cash represented his professional income and had been kept in the locker for safety purposes. However, the AO did not find this explanation tenable and imposed a penalty of ?5.49 lakhs (10% of the seized amount). The assessee appealed to the First Appellate Authority (FAA), contending that the seized cash was his professional income and that the penalty should be cancelled under section 271AAA(ii) of the Act. The FAA upheld the penalty, stating that the assessee failed to substantiate the manner in which the income was derived, as he could not provide details of the consultancy/advocacy services provided and remuneration received. The FAA found that the conditions for escaping the penalty under section 271AAA were not met by the assessee. The Appellate Tribunal considered the arguments presented by both sides. It noted that the assessee had admitted that the seized cash represented his unaccounted professional receipts and that he had paid taxes on the undisclosed income. Citing precedents, the Tribunal found that since the assessee had disclosed the income and paid taxes thereon, no penalty was leviable under section 271AAA of the Act. The Tribunal referred to relevant cases and the judgment of the Hon’ble Gujarat High Court to support its decision. In conclusion, the Tribunal reversed the FAA's order and decided in favor of the assessee, allowing the appeal and holding that no penalty was leviable under section 271AAA of the Act. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 19th July 2016.
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