2017 (7) TMI 567 - AT - Income Tax

Levy of penalty u/s 271AAA - surrender of income at the time of search - Held that - Considering the facts of the case and in the light of the order of the ITAT Chandigarh in the case of DCIT Vs. Sh. Sanjeev Goyal (2015 (11) TMI 1618 - ITAT CHANDIGARH) it is clear that assessee has made surrender of income at the time of search and in the joint surrender of four persons it was explained the amount of the undisclosed income earned was from these food processing business, property business, consultancy and liaisoning income, the details of the same were filed. The undisclosed income was declared in the return of income and tax has been paid which is accepted by the Revenue Department. The issue is, therefore, covered in favour of the assessee by the order of the ITAT, Chandigarh Bench in the case of DCIT Vs. Sanjeev Goyal (supra). Following this order, we set aside the order of the authorities below and cancel the penalty. Appeal of the assessee is allowed.

Summary

Issues:
Challenge against penalty u/s 271AAA of the Income-tax Act, 1961 for assessment year 2009-10.

Detailed Analysis:

1. Background of the Case:
- Search and seizure operation at the residential and business premises of a group.
- Disclosure of income of ?4 crores made by the group.
- Details of income from food processing, property business, consultancy, and liaisoning.
- Assessee filed return declaring total income of ?83,84,510.
- Specific disclosures included cash seized, capital introduced in firms, purchase of shares, and jewellery.

2. Initiation of Penalty Proceedings:
- Assessing officer initiated penalty proceedings u/s 271AAA due to lack of specified and substantiated manner of earning undisclosed income.
- Assessee's submission that surrender was made in consultation with departmental officials for settlement of search cases.

3. Appeal to CIT(A):
- Assessee argued that penalty was imposed solely due to not disclosing the manner of earning income.
- Cited a similar case where non-disclosure did not lead to penalty under 271AAA.
- CIT(A) partially allowed the appeal, deleting penalty for certain disclosed amounts but confirming it for others.

4. Legal Precedents and ITAT Decision:
- Counsel referred to an ITAT decision dismissing the departmental appeal on similar grounds.
- ITAT emphasized that disclosure of income and payment of taxes fulfill conditions for immunity from penalty.
- Cited judicial precedents where non-disclosure of manner of earning income did not justify penalty under similar sections.

5. Decision and Ruling:
- ITAT upheld the appeal based on the precedent and set aside the penalty.
- Assessee's compliance with disclosure and tax payment considered sufficient for immunity.
- Order of authorities below canceled, and penalty annulled in favor of the assessee.

6. Conclusion:
- Appeal allowed, and penalty under section 271AAA revoked based on compliance with disclosure and tax payment.
- Decision aligned with legal precedents and ITAT ruling, emphasizing the significance of disclosure and tax payment for penalty immunity.

This detailed analysis outlines the legal journey regarding the challenge against the penalty under section 271AAA of the Income-tax Act, 1961 for the assessment year 2009-10. The case involved the disclosure of income during a search operation, initiation of penalty proceedings due to lack of specified manner of earning undisclosed income, appeal to CIT(A), reference to legal precedents, and the final decision by ITAT in favor of the assessee based on compliance with disclosure and tax payment.