2019 (1) TMI 538 - AT - Income Tax

Penalty u/s 271AAA - on-money was received for sale of land at Gatrad which was not accounted in the books - assessee has paid taxes along with interest on this undisclosed income admitted during the course of search - whether the assessee has disclosed manner and substantiate that manner? - Held that - A perusal of the record would indicate that the ld.CIT(A) has recorded a finding that search party did not ask particular question from the assessee in whose reply he could demonstrate manner of earning the income; neither in the assessment proceedings AO has asked the manner of earning of income from the assessee. However, the assessee himself has disclosed during the course of search that this was on-money received on sale of Gatrad land. Thus, the assessee has disclosed manner and also fulfilled conditions no.2. CIT(A) has rightly appreciated this aspect and has rightly deleted the penalty. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271AAA of the Income Tax Act, 1961 for the assessment year 2012-13.

Analysis:
The appeal before the Appellate Tribunal ITAT Ahmedabad involved the deletion of a penalty of ?29,50,690 imposed by the Assessing Officer under section 271AAA of the Income Tax Act, 1961. The case stemmed from a search and seizure action conducted in the Galaxy group, where the assessee belonged to the Madhav Group. The assessee admitted undisclosed income during the search, leading to penalty proceedings initiated by the AO. The assessee contended that the statement admitting the undisclosed income was made under section 132(4) of the Act. The ld.CIT(A) found that the assessee had fulfilled all conditions of sub-section (2) of section 271AAA, thus deleting the penalty.

The relevant section 271AAA allows the Assessing Officer to levy a penalty of 10% of the undisclosed income of the specified previous year. However, sub-section (2) provides conditions for the assessee to be absolved from the penalty, including admitting the undisclosed income, specifying the manner of deriving it, and paying the tax with interest. In this case, the assessee admitted the undisclosed income and paid taxes along with interest. The dispute centered around whether the assessee disclosed and substantiated the manner of earning the income.

The ld.CIT(A) found that the search party did not specifically ask the assessee about the manner of earning the income, and the AO did not inquire about it during the assessment proceedings. However, the assessee voluntarily disclosed that the undisclosed income was from on-money received on the sale of Gatrad land, fulfilling the conditions. The ld.CIT(A) correctly concluded that the penalty should be deleted as the assessee had disclosed the manner of earning the income. Consequently, the Tribunal dismissed the Revenue's appeal against the deletion of the penalty.

In conclusion, the Tribunal upheld the decision of the ld.CIT(A) to delete the penalty under section 271AAA, as the assessee had fulfilled the necessary conditions by admitting the undisclosed income and specifying the manner of earning it. The judgment emphasizes the importance of meeting the statutory requirements to avoid penalties under the Income Tax Act.