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2019 (8) TMI 238 - AT - Income TaxLevy of penalty u/s 271AAA - statement recorded u/s 132(4) - sum surrendered during the search - HELD THAT - Assessee does not satisfy the one limb of first condition of section 271AAA(2) of the Act, i.e., admission of undisclosed in a statement u/s 132(4). As far as second limb of first condition that to specify manner of deriving the undisclosed income and second condition of substantiating the manner in which undisclosed income was derived is concerned, the Assessing Officer during assessment proceeding asked the assessee to specify and substantiate the manner of deriving the undisclosed income, however, details were not provided except the claim that the surrender/declaration was to buy peace. We are the view that the assessee cannot be said to have not satisfied the condition of specifying the manner of deriving undisclosed income as per section 271AAA in respect of surrender of amount of ₹ 20 lakh and ₹ 5 lakh against investment in property and jewellery respectively. But, if the assessee fails to satisfy any one of the conditions of section 271AAA(2), the assessee cannot escape the penalty under section 271AAA(1). Since we have already answered that the assessee failed to satisfy the one limb of first condition of section 271AAA(2), i.e., admission of undisclosed income in a statement u/s 132(4), the assessee is liable for penalty under section 271AAA. The grounds of the appeal are accordingly dismissed.
Issues Involved:
1. Deletion of penalty under Section 271AAA of the Income-tax Act, 1961. 2. Jurisdiction and legal validity of the penalty imposed by the Assessing Officer (A.O.). 3. Satisfaction of conditions under Section 271AAA(2) for exemption from penalty. 4. Interpretation of "undisclosed income" under the Act. 5. Applicability of judicial precedents and their binding nature. Detailed Analysis: 1. Deletion of Penalty under Section 271AAA: The assessee appealed against the penalty of ?4,46,055/- levied by the A.O. under Section 271AAA for the assessment year 2010-11. The penalty was imposed due to the assessee's failure to specify the source of the surrendered income. The Ld. CIT(A) partially upheld the penalty, canceling it for unexplained jewelry but maintaining it for the surrendered amounts related to property transactions and jewelry. 2. Jurisdiction and Legal Validity: The assessee contested the jurisdiction of the A.O. in levying the penalty and argued that the penalty was imposed without proper legal grounds. The Ld. CIT(A) and the Tribunal found that the A.O. had the authority to impose the penalty under Section 271AAA, as the conditions for such imposition were not fully met by the assessee. 3. Satisfaction of Conditions Under Section 271AAA(2): For exemption from penalty under Section 271AAA(2), the assessee must: - Admit the undisclosed income in a statement under Section 132(4). - Specify the manner in which the income was derived. - Substantiate the manner of deriving the income. - Pay the tax and interest on the undisclosed income. The Tribunal found that the assessee did not admit the undisclosed income in a statement under Section 132(4), nor did they specify or substantiate the manner of deriving the undisclosed income. The Tribunal referred to the statement of Sh. Jagjit Singh and the subsequent letter, which did not fulfill the statutory requirements. 4. Interpretation of "Undisclosed Income": The term "undisclosed income" as defined under Section 271AAA includes income represented by money, bullion, jewelry, or any entry in the books of accounts not recorded before the date of the search. The Tribunal concluded that the surrendered income of ?20 lakh related to property transactions and ?5 lakh related to jewelry were indeed "undisclosed income" as per the Act. 5. Applicability of Judicial Precedents: The Tribunal considered various judicial precedents, including the decisions of the Hon'ble Gujarat High Court in the case of Mahendra C Shah and the Hon'ble Delhi High Court in the case of Ritu Singhal. The Tribunal emphasized that the decision of the jurisdictional High Court (Delhi) is binding on the Delhi benches of the Tribunal. However, for assessees falling under the jurisdiction of the Punjab and Haryana High Court, the Tribunal followed the decision favorable to the assessee, as held in the case of Pradeep Aggarwal. Conclusion: The Tribunal dismissed the appeal of the assessee, holding that the conditions under Section 271AAA(2) were not satisfied. The penalty imposed by the A.O. was upheld, as the assessee failed to admit the undisclosed income in a statement under Section 132(4) and did not substantiate the manner of deriving the income. The Tribunal's decision was pronounced in the open court on 31st July 2019.
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