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2020 (3) TMI 462 - AT - Income TaxPenalty u/s 271(1)(C) - addition made on account of disclosure of additional income while filing return as part of search proceedings - assessment was completed u/s 153A r.w.s 143(3) without making any addition to returned income - HELD THAT - CIT (Appeals) has erred in confirming the levy of penalty under section 271(1)(C) of the Act by the Id. AO on addition made on account of disclosure of additional income while filing return as part of search proceedings. While doing so, the Hon'ble CIT (Appeal) failed to appreciate that there was no addition made by the Id. AO during the course of assessment proceedings u/s 143(3) r.w.s 153A of the Act to the returned income under section 153A of the Act, and therefore appellant cannot be treated to be assessee concealing income.See RAJKUMAR GULAB BADGUJAR 2019 (9) TMI 360 - SC ORDER - Decided in favour of assessee -
Issues Involved:
1. Imposition of penalty under section 271(1)(C) of the Income Tax Act for undisclosed income. 2. Validity of penalty under section 271AAB of the Income Tax Act for income disclosed during search proceedings. Issue-wise Detailed Analysis: Issue 1: Imposition of penalty under section 271(1)(C) of the Income Tax Act for undisclosed income The primary issue in these appeals was the imposition of penalties under section 271(1)(C) of the Income Tax Act on the grounds of undisclosed income. The appellants argued that the additional income disclosed in their returns filed under section 153A did not constitute undisclosed income since no additions were made by the Assessing Officer (AO) during the assessment proceedings under section 143(3) read with section 153A. The Tribunal noted that the income disclosed by the appellants was voluntary and not based on any incriminating material found during the search. The appellants contended that the additional income declared in the returns did not amount to income declared under search proceedings and thus did not warrant penalties under section 271(1)(C). The Tribunal observed that the AO had not established that the income was undisclosed within the meaning of section 271AAB. The Tribunal relied on the Supreme Court's decision in the case of Rajkumar Gulab Badgujar, where it was held that when the returned income is accepted under section 153C, penalties cannot be imposed. Furthermore, the Tribunal referred to a Co-ordinate Bench decision in Parag V. Chugh vs. DCIT, where it was concluded that penalties under section 271AAB cannot be imposed in the absence of documentary evidence suggesting undisclosed income. Issue 2: Validity of penalty under section 271AAB of the Income Tax Act for income disclosed during search proceedings The Tribunal examined whether penalties under section 271AAB were applicable when the income disclosed was not based on incriminating material found during the search. The Tribunal noted that section 271AAB applies to undisclosed income found during a search initiated on or after July 1, 2012. The definition of "undisclosed income" under section 271AAB includes income not recorded in the books of account or not disclosed to the tax authorities before the search. The Tribunal found that in the present cases, there was no documentary evidence or incriminating material found during the search that indicated undisclosed income. The income disclosed by the appellants was voluntary and not based on any documents found during the search. The Tribunal referred to the case of ACIT vs. Marvel Associates, where it was held that penalties under section 271AAB are not attracted in the absence of incriminating material. The Tribunal concluded that since the income disclosed by the appellants was voluntary and not based on any incriminating material found during the search, penalties under section 271AAB were not applicable. Consequently, the Tribunal allowed the appeals of the appellants and directed the AO to delete the penalties imposed. Conclusion: The Tribunal allowed all 11 appeals filed by the assessees, holding that the penalties under section 271(1)(C) and section 271AAB were not applicable in the absence of incriminating material found during the search. The Tribunal directed the AO to delete the penalties imposed on the appellants. The order was pronounced in Open Court on January 16, 2020.
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