2019 (1) TMI 684 - AT - Income Tax

Penalty levied u/s 271AAA - surrender of ₹ 8,00,00,000/- being difference in valuation of stock - Held that - The assessee surrendered ₹ 8 Cr as business income as is evident from the extract of statement dt. 22/12/2010. The surrendered amount was declared in the return of income u/s 153A as business income. The Assessing Officer accepted the surrendered amount as business income as declared by the assessee in the return of income and levied the income tax on it accordingly. He accepted the manner in which this additional income of ₹ 8 crore was derived as explained during the search and did not raise any objection. These facts clearly mentioned in the Assessment Order as well as in the order of the CIT(A) and are not disputed by the DR. After the surrender, the statement was closed without any further query. The CIT(A) has given a detailed findings in the order. As regards the SSA International Ltd. (2018 (6) TMI 65 - ITAT DELHI) during the search proceedings, assessee therein expressed his inability to explain the discrepancy in the stock whereas the assessee has explained the documents found during the search. As regards the other case laws referred by the Ld. DR , the facts are distinguishable as the conditions prescribed in Section 271 AAA was not fulfilled by the assessees therein whereas the assessee in the present case explained all the relevant documents and the Assessing Officer accepted the explanation given by the assessee. - decided against revenue

Summary

Issues:
- Whether the CIT(A) erred in deleting the penalty levied u/s 271AAA without the assessee elaborating on the manner in which the undisclosed income was derived?
- Whether the CIT(A) was justified in granting relief to the assessee when the basic requirement of Section 271AAA was not fulfilled?

Analysis:
1. The appeal was filed by the Revenue against the order passed by CIT(A)-III, Gurgaon for Assessment Year 2011-12. The assessee, a company engaged in manufacturing, had undergone a search and seizure operation, leading to the initiation and levy of a penalty u/s 271AAA by the Assessing Officer.

2. The CIT(A) allowed the appeal of the assessee, prompting the Revenue to challenge the decision. The Revenue argued that the penalty was rightly levied, citing various decisions in support of their stance.

3. The assessee, represented by the Ld. AR, contended that during the search action, additional business income was voluntarily disclosed, leading to the surrender of a significant amount. The manner in which this income was derived was explained, including a valuation difference in stock, which was duly accepted by the Assessing Officer.

4. The Ld. AR further argued that all conditions under Section 271AAA were satisfied by the assessee, as evidenced by the explanation provided during the search and the subsequent actions taken. The AR relied on specific cases to support their position.

5. Upon hearing both parties and examining the facts, the Tribunal noted that the assessee had disclosed the source of income and explained the valuation difference in stock during the search proceedings. The CIT(A) provided detailed findings, distinguishing the case at hand from those cited by the Revenue.

6. The Tribunal found that the conditions prescribed in Section 271AAA were fulfilled by the assessee, as the explanation provided was accepted by the Assessing Officer. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, dismissing the appeal of the Revenue.

7. In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the decision of the CIT(A) to delete the penalty under Section 271AAA.

This detailed analysis highlights the key arguments presented by both parties, the explanation provided by the assessee, the legal basis for the decisions, and the final judgment of the Tribunal.