2019 (8) TMI 838 - AT - Income Tax

Penalty u/s 271AAA r.w.s 274 - specify and substantiate the manner in which undisclosed income was earned - undisclosed income was declared in his statement recorded u/s 132(4) during the course of the search proceedings - HELD THAT - As the assessee had failed to specify and also substantiate the manner in which the undisclosed income of ₹ 1 crore that was admitted in his statement recorded under sub-section (4) of Sec.132, was derived by him, therefore, the conditions envisaged in clause (i) and clause (ii) of sub-section (2) of Sec.271AAA, had not been satisfied. General statement of the assessee that as he was mainly dealing in land, therefore, the cash balance available with him was generated due to various purchase and sale transactions can by no means be comprehended to have satisfied the aforesaid statutory requirement contemplated in sub-section (2) of Sec. 271AAA. Accordingly, the affidavit , dated 22.01.2015 filed by the assessee merely making a mention of the aforesaid facts would also not come to the rescue of the assessee insofar satisfaction of the conditions envisaged in clause (i) and clause (ii) of sub-section (2) of Sec.271AAA is concerned. Even in the return of income filed by the assessee the undisclosed income of ₹ 1 crore that was declared by him in his statement recorded u/s 132(4) had been merely put under the head business income , which also does neither specify nor substantiates the manner in which the undisclosed income that was declared in his statement recorded under Sec.132(4) , was derived by him. Accordingly assessee had failed to both specify and substantiate the manner in which the undisclosed income of ₹ 1 crore declared in his statement recorded u/s 132(4) was derived by him, therefore, the CIT(A) vide his order dated 16.10.2017 had rightly upheld the penalty u/s 271AAA - Decided against assessee.

Summary

Issues Involved:
1. Confirmation of penalty under Section 271AAA of the Income Tax Act, 1961.
2. Compliance with conditions under Section 271AAA(2) for avoiding penalty.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271AAA:
The assessee appealed against the penalty of ?10,00,000 levied by the Deputy Commissioner of Income Tax under Section 271AAA. The penalty was related to an undisclosed income of ?1 crore admitted during a search and seizure action under Section 132. The assessee's initial return declared an income of ?2,97,062, which was later revised to ?1,02,97,062. The assessment was completed with a total income of ?1,04,44,892, and the penalty proceedings were initiated for the undisclosed income.

2. Compliance with Conditions under Section 271AAA(2):
The A.O. issued a show cause notice under Section 271AAA, asking the assessee to explain why the penalty should not be imposed. The assessee's response was unsatisfactory, leading to the imposition of the penalty. The CIT(A) initially deleted the penalty, but the Tribunal later restored the matter to the CIT(A) for re-examination, emphasizing that the burden to show compliance with Section 271AAA(2) conditions was on the assessee.

In the re-examination, the CIT(A) found that the assessee failed to explain the source of the undisclosed income adequately. The assessee claimed the income was from land transactions but did not provide specific details or substantiate this claim. The Tribunal reiterated that the assessee must disclose and substantiate the manner in which the undisclosed income was derived to avoid penalty under Section 271AAA.

Tribunal's Observations:
The Tribunal noted that the assessee did not fulfill the conditions of Section 271AAA(2), which require:
- Admission of undisclosed income in a statement under Section 132(4).
- Specification and substantiation of the manner in which the undisclosed income was derived.
- Payment of tax and interest on the undisclosed income.

The assessee's general statement that the income was from land transactions did not meet these requirements. The Tribunal held that the assessee's failure to provide specific and substantiated details warranted the penalty. Consequently, the Tribunal upheld the CIT(A)'s order confirming the penalty of ?10,00,000.

Conclusion:
The appeal was dismissed, and the penalty under Section 271AAA was confirmed due to the assessee's failure to comply with the statutory requirements of disclosing and substantiating the manner in which the undisclosed income was derived. The general nature of the assessee's explanation and the lack of specific details led to the upholding of the penalty.