2019 (8) TMI 1267 - AT - Income Tax

Levy of penalty u/s 271AAB - income surrendered consequent to search action carried out on Maharaja Group of cases to which all the above assessees belonged - HELD THAT - As per section 271AAB, penalty is levied on the undisclosed income found during search and the quantum of penalty varies from 10% to 30% of the undisclosed income, depending upon fulfillment of certain conditions by the assessee as specified in the section. The statement referred to by the Ld.DR of Sh. Sukhdarshan Kumar was not available in original, We consider it fit to restore the issue back to the Ld.CIT(A) with the direction to obtain the original copy of the statement recorded of Sh.Sukhdarshan Kumar and thereafter adjudicate the issue afresh. The Ld.CI T(A) may consider all other aspects as he deems fit and thereafter decide the issue in accordance with law. Needless to add the assessee be granted adequate opportunity of hearing. Appeals of the assessee are allowed for statistical purposes.

Issues Involved:
1. Levy of penalty under Section 271AAB of the Income Tax Act, 1961.
2. Definition and interpretation of "undisclosed income" under Section 271AAB.
3. Validity of incriminating material found during search operations.
4. Consistency of penalty imposition across different assessees of the same group.

Detailed Analysis:

1. Levy of Penalty under Section 271AAB:
The appeals were filed against the orders of the Commissioner of Income Tax (Appeals), Patiala, which upheld the penalty under Section 271AAB of the Income Tax Act, 1961. The penalty was imposed on the income surrendered by the assessees following search and seizure operations conducted on the Maharaja Group. The penalty was levied at 10% of the undisclosed income, which the Assessing Officer (AO) determined as business income to cover discrepancies found in seized documents.

2. Definition and Interpretation of "Undisclosed Income":
The term "undisclosed income" as defined in the Explanation to Section 271AAB includes any income represented by money, bullion, jewelry, or other valuable articles not recorded in the books of account or disclosed to tax authorities before the search. The assessees argued that the levy of penalty was not mandatory since they had included the surrendered income in their returns, substantiated the manner of earning such income, paid due taxes along with interest, and filed returns on time. However, the AO and CIT(A) held that the surrendered income qualified as undisclosed income under Section 271AAB.

3. Validity of Incriminating Material Found During Search Operations:
The ITAT had previously adjudicated similar cases involving other assessees of the same group, where it held that no penalty under Section 271AAB was warranted if no incriminating material was found during the search. The Tribunal emphasized that the surrendered income must fall within the definition of undisclosed income for the penalty to apply. In the present appeals, the assessees contended that the surrendered income was not supported by any incriminating material, and thus, no penalty should be levied.

4. Consistency of Penalty Imposition Across Different Assessees:
The ITAT had previously deleted penalties in cases where the surrendered income was not supported by incriminating material. The Tribunal confirmed penalties only on income related to jewelry and silver found during searches. In the current cases, the assessees provided a chart indicating that the surrendered income was primarily on account of wristwatches and income declared, with no jewelry or silver involved. The Tribunal noted that the facts were identical to those in the previously adjudicated cases.

Conclusion:
The Tribunal observed that the statement of one of the group members, which was used to support the penalty, was not available in original form. Therefore, it remanded the issue back to the CIT(A) to obtain the original statement and adjudicate the issue afresh. The CIT(A) was directed to consider all relevant aspects and provide adequate hearing opportunities to the assessees. The appeals were allowed for statistical purposes, pending further examination by the CIT(A).

Order Pronouncement:
The order was pronounced in the Open Court, and all appeals were allowed for statistical purposes, with directions for further investigation and re-adjudication by the CIT(A).

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