2018 (12) TMI 203 - AT - Income Tax

Penalty u/s 271AAB - undisclosed income - proceedings initiated by the AO against a dead person - Held that - The notice initiating penalty proceedings under section 271AAB was issued by the Assessing Officer on 13.10.2015 in the name of the assessee, who had already expired on 29.04.2015. He has filed a copy of the relevant death certificate and contended that the penalty notice thus was issued by the AO in the name of a dead person, which is not enforceable in law. Since this contention of the ld. Counsel for the assessee is duly supported by the decision of the Hon ble Madras High Court in the case of Alamelu Veerappan vs.- ITO (2018 (6) TMI 760 - MADRAS HIGH COURT), we accept the same and hold that the penalty proceedings initiated by the Assessing Officer against a dead person was not enforceable in law and the penalty imposed under section 271AAB in pursuance of such invalid initiation is not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Validity of penalty imposed under section 271AAB by the Assessing Officer.
2. Assessment of undisclosed income surrendered by the assessee during search and seizure.
3. Challenge to penalty imposed under section 271AAB before the ld. CIT(Appeals).
4. Appeal by the Revenue against the order of the ld. CIT(Appeals) before the Tribunal.
5. Preliminary issue raised regarding penalty proceedings initiated against a deceased individual.

Analysis:

1. The appeal was against the penalty imposed by the Assessing Officer under section 271AAB, which was restricted by the ld. CIT(Appeals) to the extent of undisclosed income of &8377; 17,58,272 only. The Assessing Officer had initiated penalty proceedings under section 271AAB at a rate of 30% of the undisclosed income admitted and surrendered by the assessee during search and seizure.

2. The assessee, an individual, surrendered undisclosed income of &8377; 3,95,58,272 during a search and seizure action. The Assessing Officer brought the entire surrendered income to tax in the assessment under section 143(3). The penalty was imposed under section 271AAB based on unsatisfactory explanation by the assessee in response to the show-cause notice.

3. The ld. CIT(Appeals) restricted the penalty based on the argument that the undisclosed income declared by the assessee suo moto, without corroborating evidence, could not be the sole basis for levying penalty. Citing relevant case laws, the ld. CIT(Appeals) held that penalty cannot be imposed on amounts offered by the assessee to buy peace of mind, especially when no evidence of concealment was found during the search operation.

4. The Tribunal dismissed the Revenue's appeal, upholding the ld. CIT(Appeals) order on different grounds. It was noted that the penalty proceedings initiated against a deceased person were not enforceable in law, as supported by a decision of the Hon'ble Madras High Court. Therefore, the penalty imposed under section 271AAB in such circumstances was deemed unsustainable.

5. The Tribunal's decision to dismiss the Revenue's appeal was based on the invalid initiation of penalty proceedings against a deceased individual. This rendered the penalty imposed under section 271AAB not sustainable. The Tribunal upheld the ld. CIT(Appeals) order on this ground, ultimately dismissing the Revenue's appeal.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments and decisions made by the authorities involved.