2018 (3) TMI 306 - AT - Income Tax

Penalty u/s 271AAA - search and seizure - Held that - A perusal of sub-section (2) would indicate that it postulates three conditions for an assessee on whose fulfillment he will be absolved from levy of penalty. In the present case, we have perused the statement recorded under section 132(4) of the Act at the time of search. Thus, so far as first condition is concerned, the assessee should admit the undisclosed income in a statement given under sub-section (4) of section 132, that condition has been fulfilled The assessee has admitted additional income of ₹ 40 crores whose break up has been given in the explanation given before both the Revenue authorities. On account of search and seizure of the incriminating material, this income was offered for taxation. The manner was disclosed as on-money received out of various housing projects constructed by the group. Apart from this question, no other question relating to manner and substantiate earning of such income was asked from the assessee during the course of assessment proceedings. Similarly, we have gone through the assessment order. The AO has nowhere asked the assessee to demonstrate the manner or substantiate that manner. Thus, taking into consideration facts and circumstances, we are of the view that the ld.CIT(A) has rightly deleted the penalty, and accordingly, we dismiss the appeal of the Revenue.

Summary

Issues:
Appeal against deletion of penalty under section 271AAA of the Income Tax Act, 1961.

Analysis:
The Revenue appealed against the deletion of a penalty of ?33,53,650 imposed by the Assessing Officer (AO) under section 271AAA. The case involved a search under section 132 of the Income Tax Act, revealing undisclosed income of ?3,35,36,465 earned from the sale of land. The AO initiated penalty proceedings as the assessee did not specify the manner in which the income was earned. The AO's order stated that penalty was leviable at 10% of the undisclosed income. The ld.CIT(A) deleted the penalty after finding that the conditions in section 271AAA(2) were fulfilled.

During the proceedings, the Revenue argued that the assessee failed to substantiate how the income was earned. In response, the assessee presented details of various income sources, including commissions and project earnings, disclosed during the search. The assessee contended that complete details were disclosed, entitling them to immunity under section 271AAA(2).

The Tribunal analyzed section 271AAA, noting that the AO could levy a penalty of 10% of undisclosed income. Sub-section (2) outlined conditions for penalty exemption, including admitting the income, specifying its manner, substantiating it, and paying taxes with interest. The Tribunal found that the assessee admitted the income and fulfilled the first condition. Regarding the second condition, the Tribunal observed that the manner of income disclosure was related to on-money from housing projects, which was not questioned during assessment. As the AO did not request further substantiation, the Tribunal upheld the ld.CIT(A)'s decision to delete the penalty, dismissing the Revenue's appeal.

In conclusion, the Tribunal affirmed the deletion of the penalty under section 271AAA, emphasizing that the assessee had met the necessary conditions for immunity. The appeal of the Revenue was thus dismissed.