2019 (3) TMI 494 - AT - Income Tax

Penalty u/s 271AAA - undisclosed income admitted during the course of search - assessee failed to disclose the manner and substantiate the manner, how this income was earned - HELD THAT - A conjoint reading of all the material would indicate that to the extent of ₹ 3.13 crores income was declared during the course of search by Shri Sunil P. Sewani on behalf of the assessee. This has been returned by the assessee. However, with regard to the remaining part i.e. ₹ 54.50 lakhs on account of jewellery and ₹ 12.50 lakhs on account of other discprenacy admitted in the return, there is no corresponding declaration at the time of search. Thus, qua this amount, immunity available under sub-clause (2) of section 271AAA is not available. The ld.CIT(A) has erred in deleting penalty qua this undisclosed income. Therefore, we partly allow the appeal of the Revenue and restore penalty qua addition of ₹ 54.50 lakhs and ₹ 12.50 lakhs. There will not be any penalty to the extent of undisclosed income admitted at ₹ 3.13 crores and penalty at the rate of 10% for the balance undisclosed income of ₹ 67.00 lakhs out of ₹ 3.80 crores would be calculated and levied i.e. (Rs.3.80 crores minus ₹ 3.13 crores). We partly allow the ground of appeal of the Revenue.

Summary

Issues:
Appeal against deletion of penalty under section 271AAA of the Income Tax Act, 1961.

Analysis:
1. The Revenue appealed against the deletion of a penalty of ?38 lakhs imposed under section 271AAA of the Income Tax Act, 1961. The case involved a search conducted at the assessee's premises, with the assessee subsequently disclosing income during the search. The Assessing Officer (AO) imposed the penalty, stating that the assessee failed to disclose the manner in which the income was earned. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, noting that the assessee had explained and substantiated the manner in which the income was derived.

2. During the appeal, the Revenue argued that the penalty should be upheld as the assessee did not disclose details of the undisclosed income. The assessee's counsel cited a similar case before the ITAT and the High Court where the penalty was deleted. The ITAT considered the provisions of section 271AAA, which allow for penalty imposition unless the assessee admits the undisclosed income during the search and specifies the manner in which it was derived. The Tribunal upheld the deletion of the penalty in the cited case.

3. The ITAT examined the facts of the present case, focusing on the statement of Shri Sunil P. Sewani recorded during the search. The statement provided a detailed bifurcation of the undisclosed income. The AO's assessment order also outlined the undisclosed income declared by the assessee. The ITAT concluded that while a portion of the income was declared during the search and returned by the assessee, other discrepancies in the disclosure were not covered. Therefore, the ITAT partly allowed the appeal, restoring the penalty for the undisclosed amounts not covered during the search.

4. In summary, the ITAT partly allowed the Revenue's appeal, restoring the penalty for the undisclosed income not covered during the search, while exempting the penalty for the disclosed income during the search. The judgment provided a detailed analysis of the provisions of section 271AAA and the specific circumstances of the case, ensuring a fair and reasoned decision based on the facts presented.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal provisions considered, and the final decision rendered by the ITAT in the case.