2019 (6) TMI 607 - AT - Income Tax

Penalty levied u/s 271AAA - assessee has not paid taxes and penalty in respect of undisclosed income in due time - HELD THAT - In Form 26AS annexed with the Income-tax return of the assessee, detail of tax paid has been duly shown, which has not been controverted by the Senior DR. Perusal of the impugned order passed by the CIT (A) shows that somehow CIT (A) has omitted to account for the deposit of ₹ 27,70,110/- made by the assessee in the bank being tax paid on the declared income and reached the conclusion to confirm the penalty levied by the AO, whereas computation of income and Form 26AS duly shows that the said amount has been paid in the bank on 04.01.2010 which is well within time. We are of the considered view that penalty imposed in this case is not sustainable, hence ordered to be deleted. However, in case, Revenue finds that the assessee has not deposited the taxes along with interest due well within time then Revenue has liberty to file the application as per law to recall the order. Consequently, appeal filed by the assessee is allowed.

Summary

Issues:
Penalty under section 271AAA for undisclosed income - Failure to specify manner of earning - Payment of taxes and penalty in due time.

Issue 1: Penalty under section 271AAA for undisclosed income

The appellant sought to set aside the penalty levied under section 271AAA of the Income-tax Act, 1961, for the assessment year 2010-11. The penalty was imposed based on the undisclosed income declared by the assessee, including amounts related to jewellery, unaccounted cash, and property transactions. The penalty was calculated at 10% of the undisclosed income due to the assessee's failure to specify and justify the manner in which the income was earned. The Commissioner of Income-tax (Appeals) upheld the penalty, leading the assessee to appeal to the Tribunal.

Issue 2: Failure to specify manner of earning

The key contention in the appeal was the failure of the assessee to specify the manner in which the undisclosed income was earned, leading to the penalty under section 271AAA. The appellant argued that they had paid the taxes and interest on the undisclosed income within the stipulated time. The ld. CIT (A) confirmed the penalty by stating that the taxes and penalty were not paid in due time. However, the appellant presented evidence, including the return of income, computation of income, and Form 26AS, demonstrating timely payment of taxes. The Tribunal noted discrepancies in the CIT (A)'s assessment, particularly the omission of a significant tax deposit made by the assessee within the required timeframe. Consequently, the Tribunal found the penalty to be unsustainable and ordered its deletion.

Issue 3: Payment of taxes and penalty in due time

A critical aspect of the case was the timely payment of taxes and penalty on the undisclosed income by the assessee. The ld. CIT (A) based the confirmation of the penalty on the perceived failure of the assessee to meet this requirement. However, the appellant provided substantial evidence to prove the timely payment, including details of tax payments, interest, and a significant deposit made within the specified period. The Tribunal, after thorough examination of the facts and submissions, concluded that the penalty was not justified due to the erroneous assessment by the CIT (A) regarding the tax payments. The Tribunal allowed the appeal, ordering the deletion of the penalty imposed under section 271AAA.

In summary, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under section 271AAA for undisclosed income. The decision was based on the finding that the penalty was not sustainable due to the erroneous assessment of tax payments by the ld. CIT (A). The Tribunal highlighted the importance of timely payment of taxes and interest on undisclosed income while emphasizing the need for accurate evaluation before imposing penalties under the Income-tax Act.