2019 (6) TMI 42 - AT - Income Tax

Levy of penalty u/s. 271 AAA - income surrendered in search and seizure operation u/s. 132 (1) - voluntary disclosures - AO levied penalty being 10% of the surrendered income on the ground that assessee could not substantiate the manner in which the undisclosed income has been earned - CIT-A accepted the contention of the assessee regarding the substantiation of income but upheld penalty on ground of non payment of the taxes due in respect of the undisclosed income in this case in due time - HELD THAT - The revenue is not in appeal against the above findings of the CIT(A) and therefore, the reason for which the Assessing Officer has levied penalty does not survive. The observation of the CIT(A) that assessee has not paid the taxes in respect of undisclosed income in due time is concerned, we find from the copy of Form No. 26AS that the assessee has deposited the tax due there on 04.01.2010. DR also fairly conceded that the amount has been paid on 04.01.2010 which is much prior to the filing of the return of income as per the entry in Form No.26AS. Merit in the submission of the assessee that penalty u/s. 271 AAA cannot be levied in the instant case since the assessee has paid the taxes due on the surrendered income much prior to the filing of the return of the income . We, therefore, set aside the order of the CIT(A) and direct the AO to cancel the penalty so levied u/s 271AAA. If the revenue at any point of time finds that the assessee has not deposited the taxes due before the due date then the revenue is at liberty to move appropriate application for recalling of this order as per law. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271 AAA for undisclosed income.

Analysis:
The appeal was filed against the order of the CIT(A) upholding the penalty of ?2,50,000 levied by the Assessing Officer under section 271 AAA for undisclosed income. The assessee, an individual deriving income from various sources, had surrendered income during a search and seizure operation. The Assessing Officer initiated penalty proceedings, and the CIT(A) confirmed the penalty, stating that the taxes on the undisclosed income were not paid in due time. However, the CIT(A) acknowledged that the manner of earning the surrendered income was substantiated by the assessee. The Tribunal considered the arguments and evidence presented. It noted that the CIT(A) accepted the substantiation of income and that taxes were paid before the due date, as evidenced by Form No. 26AS. The Tribunal found merit in the assessee's submission that penalty under section 271 AAA could not be levied in this case due to timely tax payment. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to cancel the penalty. The Tribunal also allowed the assessee's grounds raised in the appeal, ultimately allowing the appeal.

This judgment highlights the importance of substantiating undisclosed income and timely tax payment in penalty proceedings under section 271 AAA. The Tribunal emphasized that if taxes are paid before the due date, the penalty cannot be levied, even if the income was undisclosed. The decision also underscores the significance of documentary evidence, such as Form No. 26AS, in proving timely tax payments. The judgment serves as a reminder to tax authorities to thoroughly assess all aspects of tax compliance before imposing penalties, ensuring fairness and adherence to legal requirements in such cases.