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2019 (10) TMI 446 - HC - Income TaxPenalty u/s. 271AAA(2) - Assessment order u/s.143(3) r.w.s. 153 after search u/s 132 - fulfilling the pre-conditions - HELD THAT - As per settled legal position, where the revenue had failed to question the assessee while recording the statement under section 132(4) of the Act as regards the manner of deriving such income, it cannot jump to the consequential or laster requirement of substantiating the manner of deriving the income. It is only when the officer elicits a response that such a requirement, the assessee's responsibility to substantiate manner of deriving such income would commence. When the base requirement itself fails, the question of denying the benefit of no penalty would not arise. After the director responded to question Nos.7 and 8, nothing further was asked and hence he cannot be faulted for not giving further details. Assessee has failed to fulfill the preconditions laid down under section 271AAA(2) is devoid of merits. the assessee has stated in the answer that from where the income was earned. Thereafter he cannot be blamed that he has not substantiated the manner in which the disclosed income was derived. If there was any doubt in the mind of the revenue, they should have asked further question about it when initial onus placed by the explanation has been discharged by him, the onus shifts on the revenue. If no further question are asked, the matter ends there. In light of the above discussion, there is no infirmity or otherwise in the impugned order passed by the tribunal. Both the appeals are therefore, fail and deserve to be dismissed and are accordingly dismissed.
Issues Involved:
1. Whether the ITAT erred in confirming the order of the CIT(A) deleting the penalty by ignoring the fact that the assessee has not fulfilled the pre-conditions laid down u/s. 271AAA(2). Issue-wise Detailed Analysis: Issue 1: Whether the ITAT erred in confirming the order of the CIT(A) deleting the penalty by ignoring the fact that the assessee has not fulfilled the pre-conditions laid down u/s. 271AAA(2). Assessment and Penalty Proceedings: The assessment order under section 143(3) read with section 153 of the Income Tax Act, 1961, was finalized on 26/3/2013 for AY 2011-12, determining total income at ?15,59,55,240/-. Penalty proceedings under section 271AAA of the Act were initiated for undisclosed income of ?15,00,00,000/- and a penalty of ?1.50,00,000/- was levied on 27/9/2013. Search Operation and Admission of Undisclosed Income: A search operation under section 132 of the Act was carried out in the case of Builder Group on 8/6/2010. During the search, the director of the assessee company admitted undisclosed income of ?15,00,00,000/- as unaccounted cash receivable for the year under consideration. Contentions of the Assessee: The assessee contended that they had disclosed the additional income during the search in a statement under section 132(4), substantiating the manner in which the undisclosed income was derived and paid the tax with interest on the undisclosed income, thereby claiming immunity from penalty under section 271AAA of the Act. Findings of the Assessing Officer (A.O.): The A.O. held that the assessee failed to substantiate the offered income and the manner in which the income was derived, failing to produce supporting evidence. Consequently, the A.O. imposed a penalty of ?1,50,00,000/- under section 271AAA of the Act. Appeal to Commissioner of Income Tax (Appeals): The Commissioner of Income Tax (Appeals) held that the A.O. was not justified in imposing the penalty and deleted the penalty imposed on the undisclosed income. Appeal to Income Tax Appellate Tribunal (ITAT): The revenue appealed to the ITAT, which dismissed the appeal, upholding the CIT(A)'s decision. Arguments of the Revenue: The revenue argued that the tribunal failed to consider that the director of the assessee company admitted undisclosed income during the search but did not specify the manner in which the income was derived. The revenue contended that the assessee did not satisfy conditions (i) and (ii) of section 271AAA(2) and relied on the decision of the Delhi High Court in PCIT vs. Smt. Ritu Singal. Submissions on behalf of the Assessee: The assessee argued that the tribunal's order was just and legal, relying on decisions in PCIT Vs. M/s. Sun Corporation and PCIT Vs. Backbone Enterprise Ltd., which held that sufficient compliance with section 271AAA(2)(i) and (ii) was demonstrated. The assessee contended that the director had explained the manner in which the income was earned, and no further questions were asked by the revenue, thus fulfilling the requirements. Court's Analysis: The court considered section 271AAA and concluded that the director of the assessee company had disclosed the unaccounted income and the manner in which it was derived during the search. The tribunal observed that expecting the assessee to specify and point out facts in the exact format required under clauses (i) and (ii) of section 271AAA(2) was impractical. The court held that there was sufficient compliance with the requirements of section 271AAA(2)(i) and (ii). Conclusion: The court found no infirmity in the tribunal's decision and dismissed the appeals, answering the substantial question of law in favor of the assessee and against the revenue.
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