2020 (2) TMI 1231 - AT - Income Tax

Penalty u/s 271AAB(1)(a) - assessee has admitted the undisclosed income u/sec. 132(4) - Whether assessee has filed the return of income within the specified date and admitted income and was offered for taxation? - HELD THAT - We find that the assessee had filed the return of income on 31/10/2013 for the A.Y. 2013-14 which is placed in paper book at page No. 41, therefore the Assessing Officer is not correct in rejecting the plea of the assessee on the ground that the assessee has not filed the return of income as per specified date. Insofar as application of section 271AAB(1)(a) is concerned, we find that during the course of assessment proceedings as well as penalty proceedings, the assessee has explained before the Assessing Officer that the society had received anonymous donations from various persons for upliftment of the activities of the society. It is also submitted that the said donations received for the betterment of the activities of the society and the persons who have contributed such donations were not anonymously disclosed their names/identify and submitted that due to this reason the society was handicapped in recording their names and identity. DR has pointed out that the assessee has failed to substantiate the manner in which the undisclosed income is derived. So far as this aspect is concerned, as per section 115BBC, any trust or institution received anonymous donations, is not necessary to mention identity/address and other particulars in the books. Therefore, once the assessee has explained the way in which he derived income and also the purpose for which it is utilized, it is not necessary for the assessee being an educational society to substantiate further with the source of the income received in view of section 115BBC(2) (3) of the Act. Therefore, in view of the facts and circumstances of the case, we find that the assessee has fulfilled all the conditions laid down in section 271AAB(1)(a), therefore penalty at 10% is leviable in this case. No infirmity in the order passed by the ld. CIT(A). Thus, this appeal filed by the Revenue is dismissed. A.Y. 2014-15 - the due date of filing of the return is 30/09/2014. The assessee filed the return of income on 29/11/2014 which was beyond the specified date and confirmed the order of the Assessing Officer by rejecting the plea of the assessee and in levying penalty at 10%. We find no reason to interfere with the order passed by the ld.CIT(A). Thus, this appeal filed by the assessee is dismissed.

Summary

Issues Involved:
1. Penalty proceedings under Section 271AAB of the Income Tax Act, 1961.
2. Determination of the applicable penalty rate (10% vs. 30%).
3. Timeliness of filing the return of income.
4. Substantiation of anonymous donations as undisclosed income.
5. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Penalty Proceedings under Section 271AAB:
The case involves the imposition of penalty under Section 271AAB of the Income Tax Act, 1961, following a search and seizure operation conducted on the assessee. The Assessing Officer (AO) initiated penalty proceedings after discovering incriminating material indicating undisclosed income.

2. Determination of the Applicable Penalty Rate:
The AO imposed a 30% penalty on the undisclosed income, arguing that the assessee failed to substantiate the manner in which the income was derived. The assessee contended that the penalty should be 10% as per Section 271AAB(1)(a), arguing compliance with the conditions laid down therein.

3. Timeliness of Filing the Return of Income:
The AO noted that the assessee filed the return of income on 03/11/2014, beyond the specified date of 31/10/2013. However, the Commissioner of Income Tax (Appeals) [CIT(A)] found that the return was filed within the extended due date of 31/10/2013 as per CBDT notification, thus qualifying for a 10% penalty rate.

4. Substantiation of Anonymous Donations as Undisclosed Income:
The assessee claimed the undisclosed income as anonymous donations under Section 115BBC, which does not require maintaining the identity of donors. The CIT(A) accepted this explanation, noting that the assessee fulfilled the conditions of Section 271AAB(1)(a).

5. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 137 days, citing medical reasons. The Tribunal found sufficient cause to condone the delay and proceeded to hear the appeal on merits.

Judgment:

ITA No. 384/VIZ/2017:
The Tribunal upheld the CIT(A)'s decision, confirming that the assessee filed the return within the extended due date and substantiated the anonymous donations as per Section 115BBC. Thus, the penalty was rightly reduced to 10% as per Section 271AAB(1)(a). The appeal by the Revenue was dismissed.

C.O. No. 86/VIZ/2017:
The cross-objection filed by the assessee, being supportive of the CIT(A)'s order, was dismissed as the Tribunal already dismissed the Revenue's appeal.

ITA No. 65/VIZ/2018:
For the Assessment Year 2014-15, the Tribunal found that the assessee filed the return beyond the specified date of 30/09/2014. The CIT(A)'s decision to uphold the 10% penalty was affirmed, and the assessee's appeal was dismissed.

Conclusion:
The appeals filed by both the Revenue and the assessee were dismissed, and the cross-objection by the assessee was also dismissed. The Tribunal found no infirmity in the CIT(A)'s orders and upheld the reduced penalty rate of 10% for the Assessment Year 2013-14 while maintaining the 10% penalty for the Assessment Year 2014-15 due to late filing of the return.