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2017 (5) TMI 718 - AT - Income TaxPenalty u/s 271AAA - additional income on account of incriminating document found during the course of search - Held that - The search took place on 11.02.2010. The assessee offered income of ₹ 12,48,85,000/- in his statement recorded u/s 132(4) during the course of search on 12.02.2010. The assessee filed his original return of income for the A.Y. 2010-11 on 31.07.2010 offering income of ₹ 22,00,00,000/- for taxation. In the upshot, as the assessee admitted the undisclosed income of ₹ 12,48,85,000/- during the course of search on 12.02.2010, he is liable to penalty u/s 271AAA @ 10% on the balance amount of Rs. ₹ 9,51,15,000/- only (Rs. 22,00,00,000/- minus ₹ 12,48,85,000/-). The A.O. is directed to impose penalty u/s 271AAA @ 10% on the balance amount of ₹ 9,51,15,000/- in place of ₹ 2,20,00,000/- computed by him. - Decided partly in favour of assessee.
Issues Involved:
1. Legitimacy of the penalty levied under Section 271AAA of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Legitimacy of the Penalty Levied under Section 271AAA of the Income Tax Act, 1961: The case pertains to the assessment year 2010-11 and revolves around the penalty levied under Section 271AAA of the Income Tax Act, 1961. The appeal was filed by the assessee against the order of the Commissioner (Appeals) – 38, Mumbai, which upheld the penalty imposed by the Assessing Officer (A.O.). Facts of the Case: A search under Section 132 of the Act was conducted on 11.02.2010 at the premises of M/s. Orbit Corporation Ltd. (OCL) and its group concerns, including the residence and business premises of the assessee. The A.O. issued a notice under Section 153A, and the assessee filed a return of income declaring a total income of ?22,70,21,590/-, which included ?22,00,00,000/- as undisclosed income. The A.O. completed the assessment under Section 143(3) and subsequently levied a penalty of ?2,20,00,000/- (10% of the additional income of ?22,00,00,000/-) on the grounds of concealed income. Arguments by the Assessee: The assessee argued that the additional income was admitted during the search proceedings and included in the return of income to avoid prolonged litigation. The assessee cited several judicial precedents, including CIT vs. Mahendra C. Shah, Sita Ram Gupta vs. ACIT, DCIT vs. Rajendra Prasad Dokania, and others, to support the claim that the penalty under Section 271AAA should not be levied if the conditions stipulated under the section are met. Arguments by the Revenue: The learned DR relied on the order of the learned CIT(A) confirming the penalty imposed by the A.O. under Section 271AAA. Tribunal’s Analysis: The Tribunal examined the decisions cited by the assessee. In the case of Mahendra C. Shah, the High Court held that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance. Similarly, in Sita Ram Gupta, the Tribunal allowed the appeal stating that the assessee had paid due tax on the admitted undisclosed income, and the manner of deriving the income was accepted by the A.O. without variation. The Tribunal noted that under Section 271AAA, the penalty can be avoided if the assessee in a statement under Section 132(4) admits the undisclosed income, specifies the manner in which it was derived, substantiates the same, and pays the tax along with interest. The Tribunal scrutinized the statement of the assessee recorded during the search and found that the assessee had admitted the undisclosed income of ?12,48,85,000/- and substantiated it. The remaining amount of ?9,51,15,000/- (?22,00,00,000/- minus ?12,48,85,000/-) was not substantiated in the same manner. Conclusion: The Tribunal concluded that the assessee is liable to penalty under Section 271AAA @ 10% on the balance amount of ?9,51,15,000/-. The A.O. was directed to impose the penalty accordingly, reducing it from the initially computed ?2,20,00,000/-. Final Order: The appeal was partly allowed, and the penalty was recalculated to 10% of ?9,51,15,000/-. Order Pronouncement: The order was pronounced in the open Court on 05/05/2017.
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