2018 (12) TMI 1513 - AT - Income Tax

Penalty u/s 271AAB (1)(a) - whether the authorized officer had found any specified asset i.e. any money, bullion, jewellery or other valuable article or things as per explanation (c) forming of sec. 271AAB? - Held that - There is no such material indicated during the course of hearing. We find that co-ordinate bench s order in ACIT vs. Sri Kanwar Sain Gupta 2018 (6) TMI 1559 - ITAT KOLKATA declines Revenue s identical arguments as held section 271AAB of the Act applies in relation to the impugned penalty @ 10% of the undisclosed income as stood defined in Explanation (c) thereto. There is no material in the case file to indicate that the assessee s undisclosed income represents any money, bullion, jewellery or valuable article or any entry in the books or other documents therein. We make it clear that we are dealing with a penalty provision in tax statute which is to be strictly interpreted. We therefore are of the opinion that the CIT(A) has rightly deleted the impugned penalty as the assessee s search statement nowhere indicated the corresponding undisclosed income as per specific requirement in the Act. - Decided in favour of assessee.

Issues Involved:
1. Delay in filing the appeal by the Revenue.
2. Imposition of penalty under Section 271AAB of the Income Tax Act, 1961.
3. Validity of the penalty imposed on the undisclosed income of ?2,60,00,000.
4. Assessee's cross-objection regarding the penalty on ?19,15,065.

Detailed Analysis:

1. Delay in Filing the Appeal by the Revenue:
The Revenue's appeal suffered from a 25-day delay in filing. The delay was attributed to various procedural formalities and the compilation of necessary records. The authorized representative did not dispute this delay during the hearing. Consequently, the delay was condoned, and the main appeal was taken up for adjudication on merits.

2. Imposition of Penalty Under Section 271AAB:
The core issue raised by the Revenue was that the CIT(A) erred in reversing the Assessing Officer’s action of imposing a penalty of ?26 lakh under Section 271AAB. The CIT(A) found that the penalty was imposed on an amount of ?2,60,00,000, which was offered by the assessee suo moto during the search proceedings without any corroborating evidence of undisclosed income or assets. The CIT(A) relied on several judicial precedents to conclude that the penalty cannot be levied merely based on the assessee's statement without supporting evidence.

3. Validity of the Penalty Imposed on the Undisclosed Income of ?2,60,00,000:
The CIT(A) noted that during the search and seizure operation, only ?19,15,065 worth of undisclosed income was evidenced through seized documents, cash, and stock. The remaining ?2,60,00,000 was offered by the assessee to buy peace and avoid litigation, without any incriminating evidence found during the search. The CIT(A) cited the Supreme Court's judgment in Sudarshan Silk & Saries, which held that penalty cannot be imposed solely based on the assessee's statement without corroborating evidence. Therefore, the CIT(A) directed the Assessing Officer to levy the penalty only on the evidenced amount of ?19,15,065.

4. Assessee's Cross-Objection Regarding the Penalty on ?19,15,065:
The assessee's cross-objection supported the CIT(A)'s decision to delete the penalty on the ?2,60,00,000 but contested the penalty on ?19,15,065. However, the Tribunal found that this penalty was rightly based on the undisclosed income evidenced during the search. The penalty on this amount was upheld as it met the criteria under Section 271AAB.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection. It upheld the CIT(A)'s decision to delete the penalty on ?2,60,00,000 due to lack of corroborating evidence and confirmed the penalty on ?19,15,065, which was supported by evidence found during the search. The order was pronounced in the open court on 26/12/2018.

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