2017 (11) TMI 513 - AT - Income Tax

Penalty u/s 271AAA - additional income offered by the assessee during assessment proceedings - Held that - The issue before us is identical in nature to that of brother of the assessee s case 2017 (11) TMI 456 - ITAT DELHI wherein the ITAT has allowed the appeal of the assessee therein as held that as DR has pointed out that the manner of earning of the surrendered income has not been disclosed by the assessee income has not been disclosed by the assessee whereas the assessee by letter dated 21.01.2010 has disclosed the manner of earning the said income by way of trading in commodities and real estate and also stated this fact is substantiated from the seized material. Moreover this factual position is not denied by the AO and this is not the basis for imposing the penalty. In that view of the matter and in view of such facts and circumstances of the case, the CIT(A) is not justified in confirming the action of the AO and accordingly, we direct the AO to delete the penalty imposed under section 271AAA. Appeal of the assessee is allowed.

Summary

Issues:
1. Upholding of penalty order by CIT(A)
2. Applicability of Sec 271AAA
3. Observations on surrender made by the assessee
4. Justification of penalty imposition
5. Adjudication by CIT(A)

Analysis:

1. Upholding of penalty order by CIT(A):
The appeal was filed against the order passed by CIT(A)-XXXIII, New Delhi, upholding the penalty order passed by the Assessing Officer (AO). The grounds of appeal challenged the legality and jurisdiction of the penalty order, claiming it to be without merit and against the law. The appellant argued that the CIT(A) erred in upholding the penalty, stating that the penalty was excessive and should be reduced. The appellant contended that the penalty order was based on incorrect interpretation of facts and circumstances.

2. Applicability of Sec 271AAA:
The case involved the applicability of Section 271AAA of the Income Tax Act, 1961. The Assessing Officer imposed a penalty under this section, citing deliberate default by the assessee. The penalty amount was challenged by the appellant, arguing that the surrender made by the assessee should exempt them from penalty imposition. The appellant referenced a similar case involving the assessee's brother, where the ITAT had ruled in favor of the brother regarding the penalty under Section 271AAA. The appellant claimed that the surrender was accepted by the department, taxes were paid on the assessed income, and the manner of earning the surrendered income was disclosed.

3. Observations on surrender made by the assessee:
The ITAT, New Delhi, in a related case involving the assessee's brother, provided a detailed analysis of the surrender made during the search conducted under Section 132 of the Income Tax Act. The ITAT noted that the assessee had filed letters modifying the surrendered income based on seized documents, and the Assessing Officer assessed the income at the same amount declared or surrendered by the assessee. The ITAT concluded that the CIT(A) was not justified in confirming the penalty imposed under Section 271AAA, as the manner of earning the surrendered income was disclosed by the assessee.

4. Justification of penalty imposition:
The Assessing Officer imposed the penalty under Section 271AAA, stating that the default of the assessee was deliberate. However, the ITAT found that the surrender made by the assessee, based on seized documents, and the subsequent modifications to the surrendered amount were in line with the income assessed by the AO. The ITAT emphasized that the manner of earning the surrendered income was disclosed by the assessee, and the penalty imposition was not justified based on the facts and circumstances of the case.

5. Adjudication by CIT(A):
The CIT(A) dismissed the appeal of the assessee, leading to the appeal before the ITAT. The ITAT, considering the facts and legal provisions, set aside the order of the CIT(A) and allowed the appeal of the assessee. The ITAT's decision was based on the detailed analysis of the surrender made by the assessee, the assessment of income by the AO, and the disclosure of the manner of earning the surrendered income. The ITAT's ruling was in favor of the assessee, highlighting the incorrect confirmation of the penalty by the CIT(A).

In conclusion, the ITAT allowed the appeal of the assessee, setting aside the penalty imposed under Section 271AAA, based on the detailed analysis of the surrender, assessment, and disclosure of income, as well as the legal provisions and precedents cited in the case.