2018 (4) TMI 797 - AT - Income Tax

Penalty u/s.271AAA - undisclosed income - Held that - The assessee has duly made the disclosure in the course of search of for the undisclosed income and showed the same in return of income, paid taxes thereon and the assessing officer has accepted the income returned and the source of income disclosed. The ld. Commissioner of Income Tax (Appeals) has elaborately considered the issue and passed a reasonable order deleting the levy of penalty. As coming to the said conclusion the ld. Commissioner of Income Tax (Appeals) has also placed reliance upon honourable Allahabad High Court and honourable Gujarat High Court decision. The ratio emanating out of those decisions was that if the search party doesn t put question to the assessee about the source of income, any adverse inference for the levy of penalty under section 271AAA, cannot be taken. No contrary decision by the Revenue has been shown to us. - Decided against revenue

Summary

Issues involved:
1. Whether the Commissioner of Income Tax (Appeals) was justified in allowing the appeal of the appellant based on specific grounds.
2. Whether the Commissioner of Income Tax (Appeals) correctly observed the absence of specific questions put to the appellant by the authorized officer.
3. Whether the Commissioner of Income Tax (Appeals) was justified in relying on the decision of the Honorable Nagpur Tribunal.
4. Whether the Commissioner of Income Tax (Appeals) was right in differentiating between the provisions of Section 271(l)(c) and Section 271AAA.

Issue 1:
The appeal by the Revenue was against the order of the Commissioner of Income Tax (Appeals) pertaining to the assessment year 2009-10. The grounds of appeal raised questions about the justification of allowing the appeal based on the manner in which the undisclosed income was derived. The Authorized Officer's specific questioning during the appellant's statement under Section 132(4) of the Act was a key point of contention. The Commissioner of Income Tax (Appeals) relied on judicial decisions to support the appellant's case, emphasizing the importance of specific questioning and substantiation of undisclosed income.

Issue 2:
During the penalty proceedings under Section 271AAA, the Assessing Officer imposed a penalty on the appellant for undisclosed income. However, the Commissioner of Income Tax (Appeals) delved into the details of the case, considering the appellant's admission of income during the search and subsequent tax payment. The absence of specific questions by the authorized officer regarding the source of income was highlighted, leading to the deletion of the penalty by the Commissioner of Income Tax (Appeals).

Issue 3:
The reliance on the decision of the Honorable Nagpur Tribunal in the case of M/s Concretes Developers was a point of contention. The Commissioner of Income Tax (Appeals) based the decision on this case, which had not been accepted by the Revenue, leading to an appeal filed under section 260 A. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the precedent set by the judicial decisions referred to in the case.

Issue 4:
The differentiation between the provisions of Section 271(l)(c) and Section 271AAA was a critical aspect of the case. The Commissioner of Income Tax (Appeals) analyzed the conditions under Section 271AAA, emphasizing the importance of admitting undisclosed income, specifying its manner of derivation, and paying the necessary taxes. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the lack of specific questioning by the authorized officer and the substantial compliance by the appellant in disclosing and paying taxes on the undisclosed income.