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2018 (11) TMI 1002 - AT - Income TaxLevy of Penalty u/s 271(1)(c) where penalty u/s 271AAA levied on the same amount - amount which was offered by the Assessee as current liability on account of advances received - Undisclosed income referred to in Section 271AAA(1) - Held that - A valid presumption can legitimately arrived at, that the same income, which is assessed in the hands of the assessee in one year and has been accepted by the assessee, will not be offered by the assessee in any subsequent year. Subsequent conduct of NHPL, is not recognizing any income under Project completion Method, in any subsequent year, despite substantial lapse of time imparts validity to this presumption. Thus, the character of the income assessed in the Assessment Orders, changed from protective additions (at the time of Assessment Order) to substantive additions at the time when penalty orders were passed by the AO because the NHPL has accepted the additions by not filing the appeals. As the character of the additions, at the time of penalty orders U/s 271AAA of I.T. Act had already undergone change from protective additions to substantive additions, the contentions raised by the Ld. Counsel for NHPL has no merit. We are of the view that both the assessees, NHPL and NDPL have failed to comply with Section 271AAA(2)(i) and Section 271AAA(2)(ii). In addition, NHPL has also failed to comply with Section 271AAA(2)(iii). It is readily inferred from perusal of Section 271AAA of I.T. Act that the three requirements U/s 271AAA(2), i.e., Sections 271AAA(2)(i), 271AAA(2)(ii), 271AAA(2)(iii) of I.T. Act are cumulatively required to be fulfilled by an Assessee, to escape penalty U/s 271AAA(1) of I.T. Act. Thus, both the assessees, NHPL and NDPL are hit by Section 271AAA(1) of I.T. Act. However, once penalty U/s 271AAA of I.T. Act has been levied in respect of undisclosed income, the AO was in error of law prescribed U/s 271AAA(3), in imposing further penalty U/s 271(1)(c) in respect of the same undisclosed income. U/s 271AAA(3) of I.T. Act, there is clear embargo on the AO for imposing penalty U/s 271(1)(c) in respect of undisclosed income referred to in Section 271AAA(1). As far as penalty U/s 271(1)(c) in the case of NHPL for A.Y. 2012-13 in respect of undisclosed income of ₹ 63,00,000/- is concerned, the Ld. CIT(A) has given detailed reasoning for confirming this penalty. The relevant portion of the order of the CIT(A) has already been reproduced in earlier part of this order, and we have noticed that the order of the CIT(A) derives support from the precedents in the cases of MAK Data P. Ltd. v. CIT (2013 (11) TMI 14 - SUPREME COURT), CIT v MAK Data P Ltd. . 2013 (1) TMI 574 - DELHI HIGH COURT , CIT v Acrotech Ltd. 2013 (9) TMI 901 - DELHI HIGH COURT . Assessee did not bring any material for our consideration to warrant any interference with order of Ld. CIT(A) as far as her decision to confirm the penalty U/s 271(1)(c) of I.T. Act in the case of NHPL for A.Y. 2012-13 in respect of undisclosed income of ₹ 63,00,000/- is concerned.
Issues Involved:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Confirmation of penalty under section 271AAA of the Income Tax Act, 1961. 3. Protective vs. substantive additions. 4. Compliance with Section 271AAA(2) requirements. Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c): The Revenue's appeal (ITA No. 3531/Del/2015) contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting the penalty under section 271(1)(c) amounting to ?66,94,323. The CIT(A) had deleted this penalty on the grounds that the same income was already subjected to penalty under section 271AAA, which precludes further penalty under section 271(1)(c) as per section 271AAA(3). The Tribunal upheld this view, noting that once penalty under section 271AAA is levied, no further penalty under section 271(1)(c) can be imposed for the same undisclosed income. 2. Confirmation of Penalty under Section 271AAA: The appeals by the assessees (ITA Nos. 3135, 3136, 3137, and 3155/Del/2015) challenged the confirmation of penalties under section 271AAA. The Tribunal noted that the assessees had failed to meet the conditions under section 271AAA(2), specifically: - The disclosure of income was not made in a statement under section 132(4) but through a letter to the DDIT. - The assessees did not substantiate the manner in which the undisclosed income was derived. - NHPL failed to pay taxes on the disclosed income, further violating section 271AAA(2)(iii). The Tribunal upheld the CIT(A)'s decision to confirm the penalties under section 271AAA, emphasizing that the conditions under section 271AAA(2) are cumulative and must all be satisfied to avoid penalty under section 271AAA(1). 3. Protective vs. Substantive Additions: The assessees argued that penalties cannot be levied on protective additions. The Tribunal clarified that in this case, the protective additions were made due to the assessees' contradictory stands and not because of uncertainty about the assessee in whose hands the income was to be taxed. Since the assessees did not appeal against the additions, they became substantive. The Tribunal noted that protective additions accepted by the assessee change to substantive, thus justifying the penalties. 4. Compliance with Section 271AAA(2) Requirements: The Tribunal found that the assessees did not comply with the requirements of section 271AAA(2): - The disclosure was not made under oath as required by section 132(4). - The manner of deriving the undisclosed income was not substantiated. - NHPL did not pay the requisite taxes and interest on the undisclosed income. The Tribunal concluded that the assessees were rightly penalized under section 271AAA(1) as they failed to meet the conditions for exemption under section 271AAA(2). Conclusion: The Tribunal dismissed all five appeals, upholding the penalties under section 271AAA and confirming the deletion of penalties under section 271(1)(c) where applicable. The judgments emphasized strict compliance with statutory requirements for disclosures and penalties related to undisclosed income following a search.
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