2019 (12) TMI 410 - AT - Income Tax

Penalty u/s 271AAA - assessment order framed u/s 143(3) r.w.s 153A - undisclosed income - HELD THAT - A bare perusal of the penalty order shows that the AO has levied the penalty mechanically by taking difference in the return of income and assessed income. Entire penalty order is devoid of any specific findings in respect of any specific seized material or undisclosed income detected as a result of search. In our understanding of the law, it was incumbent upon the Assessing Officer to first establish that there was undisclosed income within the meaning of section 271AAA of the Act before any penalty under the said section could be levied. As relying on DURGA KAMAL RICE MILLS VERSUS COMMISSIONER OF INCOME-TAX. 2003 (4) TMI 26 - CALCUTTA HIGH COURT burden of proof in the penalty proceedings is independent and larger than in the assessment proceedings and the assessment proceedings and penalty proceedings are different. Findings in the assessment proceedings are not sufficient to impose penalty. Further, penalty cannot be imposed when assessment has been enhanced merely on estimates. Considering the facts of the case in totality, we do not find any error or infirmity in the findings of the ld. CIT(A). - Decided against revenue.

Summary

Issues:
Challenge to deletion of penalty under section 271AAA of the Income-tax Act, 1961.

Analysis:
1. The Revenue challenged the deletion of a penalty of ?76,42,611 under section 271AAA of the Income-tax Act, 1961 by the ld. CIT(A) for assessment year 2012-13.
2. The penalty was based on a search operation under section 132 of the Act, where the Assessing Officer assessed the income at ?5,99,94,55,170 due to the belief that the assessee provided accommodation entries.
3. The ld. CIT(A) deleted the penalty after considering that the additions were confirmed on an estimated basis without establishing undisclosed income within the meaning of section 271AAA of the Act.
4. The Assessing Officer failed to provide specific findings on any seized material or undisclosed income, leading to a mechanical levy of penalty without meeting the requirements of section 271AAA.
5. The ld. CIT(A) emphasized that the burden of proof in penalty proceedings is higher than in assessment proceedings, and penalty cannot be imposed solely on estimates without conclusive evidence of undisclosed income.
6. The Tribunal dismissed the Revenue's appeal, citing that the facts of the case did not align with the decisions relied upon by the Revenue, upholding the deletion of the penalty under section 271AAA.

This comprehensive analysis highlights the grounds for the challenge, the basis for the penalty, the considerations by the ld. CIT(A), and the Tribunal's decision in dismissing the appeal. The judgment underscores the importance of establishing undisclosed income and meeting the criteria set forth in section 271AAA before levying penalties, ensuring a fair and just application of tax laws.