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2019 (5) TMI 686 - AT - Income TaxPenalty u/s 271AAA - defective notice - non specification of clear charge - change of stand - HELD THAT - Initially the Assessing Officer recorded the finding that assessee company has not specified and substantiated the manner in which such unaccounted income has been derived by it . But, subsequently, he recorded the finding that the assessee company has failed to explain the manner in which the undisclosed income was derived . We further find that in the notice issued under Section 271AAA, the penalty proceedings have been initiated on altogether different charges. There is no clarity in the stand of the Revenue for initiation of penalty under Section 271AAA, whether it is for failure of the assessee to explain the manner in which undisclosed income was derived or it is the failure of the assessee to substantiate the manner of earning of income or for not recording of such income in the books of account. See BHAVI CHAND JINDAL 2018 (9) TMI 1560 - DELHI HIGH COURT - thus we cancel the penalty levied under Section 271AAA - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271AAA for the assessment years 2011-12 and 2012-13. 2. Whether the penalty was levied on grounds other than those on which it was initiated. 3. Applicability of the decision of the Hon'ble Jurisdictional High Court in Principal Commissioner of Income Tax, Central-3 Vs. Bhavi Chand Jindal. Issue-Wise Detailed Analysis: 1. Levy of Penalty under Section 271AAA: The appeals by the assessee for the assessment years 2011-12 and 2012-13 challenge the levy of penalties amounting to ?11,41,259/- and ?1,20,000/-. The penalties were imposed due to the assessee's failure to substantiate the manner in which the undisclosed income was earned during a search and seizure operation. According to Section 271AAA(2), the penalty can be avoided if the assessee admits the undisclosed income, specifies the manner in which it was derived, substantiates this manner, and pays the tax along with interest. 2. Grounds for Penalty Initiation vs. Levy: The assessee's counsel argued that the penalty was levied on grounds different from those on which it was initiated. The Assessing Officer (AO) initially stated that the assessee failed to specify and substantiate the manner in which the undisclosed income was derived. However, the penalty order cited the failure to substantiate the manner of earning the income as the reason for the penalty. The counsel relied on the decision of the Hon'ble Jurisdictional High Court in Principal Commissioner of Income Tax, Central-3 Vs. Bhavi Chand Jindal, which distinguished between disclosing the manner of earning undisclosed income and substantiating it, as per Section 271AAA(2) clauses (i) and (ii). 3. Applicability of High Court Decision: The Revenue argued that the penalty was correctly levied as per the charges specified in the assessment order. They cited various judgments to support their stance that even if the charge was not clearly specified, it would not invalidate the penalty. However, the Tribunal found that the AO's initiation and levy of penalty lacked clarity. The AO's findings in the assessment order and the penalty initiation notice were inconsistent and did not align with the requirements under Section 271AAA. Tribunal's Conclusion: The Tribunal reviewed the submissions and the material presented. It noted the inconsistency in the AO's findings and the lack of clarity in the penalty initiation notice. The Tribunal referred to the Hon'ble Jurisdictional High Court's decision in Bhavi Chand Jindal, which emphasized the distinction between disclosing and substantiating the manner of earning undisclosed income. Given these inconsistencies and the applicable High Court decision, the Tribunal concluded that the penalty under Section 271AAA was not justified and should be canceled. Final Decision: The Tribunal allowed both appeals of the assessee and canceled the penalties levied under Section 271AAA for the assessment years 2011-12 and 2012-13. The decision was pronounced in the open Court on 07.05.2019.
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