2018 (2) TMI 57 - HC - Income Tax

Penalty u/s 271AAA - sufficient compliance with the provision if tax is shown to have been paid before the assessment was completed - Held that - A conjoint reading of the provisions of clause (iii) of subsection (2) of section 271AAA of the Act and Explanation 5 to section 271(1) of the Act shows that the language employed in the second exception under Explanation 5 to section 271(1) is, pays the tax together with interest, if any, in respect of such income and clause (iii) of sub-section (2) of section 271AAA of the Act employs the language pays the tax, together with interest, if any, in respect of the undisclosed income . Thus, the language employed in both the sections is similar. Therefore, the Tribunal as well as the Commissioner (Appeals) were wholly justified in applying the principles enunciated by this High Court in Commissioner of Income Tax v. Mahendra C. Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) while interpreting the provisions of sub-section (2) of section 271AAA of the Act. Accordingly, the assessee has also satisfied the third condition laid down under sub-section (2) of section 271AAA of the Act. The Tribunal was, therefore, wholly justified in upholding the deletion of penalty under section 271AAA of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenge to order under section 260A of the Income Tax Act, 1961 regarding penalty imposed under section 271AAA - Non-fulfillment of conditions laid down under section 271AAA - Deletion of penalty by Commissioner (Appeals) and Tribunal.

Detailed Analysis:

1. Issue 1 - Challenge to Penalty Order:
The appellant-revenue challenged the order dated 10.4.2017 made by the Income Tax Appellate Tribunal, proposing substantial questions of law regarding the non-fulfillment of conditions under section 271AAA of the Act. The appellant contended that the assessee failed to specify the manner of undisclosed income, substantiate its derivation, and pay the tax along with interest, thus challenging the deletion of penalty by the Commissioner (Appeals).

2. Issue 2 - Assessment and Search Proceedings:
The search and seizure proceedings under section 132 of the Act revealed undisclosed income of ?15 crore admitted by a partner of the assessee firm. The Assessing Officer imposed a penalty of ?15 lakh under section 271AAA as the assessee failed to substantiate the manner in which the income was derived. The Commissioner (Appeals) deleted the penalty, leading to the appeal to the Tribunal.

3. Issue 3 - Conditions for Immunity from Penalty:
The Commissioner (Appeals) found that the three conditions under section 271AAA were satisfied by the assessee. The first condition regarding specifying the manner of earning undisclosed income was fulfilled as per the partner's statement. The second condition of admitting undisclosed income was also met, and the third condition of paying tax along with interest before the penalty proceedings were concluded was satisfied.

4. Issue 4 - Tribunal's Decision:
The Tribunal upheld the deletion of penalty, noting that the manner in which income was derived was disclosed during the search, and the undisclosed income was received as on-money. Both the Commissioner (Appeals) and the Tribunal found that the conditions under section 271AAA were fulfilled based on the partner's statement and timely payment of tax and interest.

5. Conclusion:
The High Court summarily dismissed the appeal, stating that no question of law arose as the Tribunal's decision was found to be justified. The Court upheld the deletion of penalty under section 271AAA, as the conditions were satisfied by the assessee. The judgment highlighted the importance of fulfilling the specified conditions to avail immunity from penalties under the Income Tax Act, 1961.