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2020 (4) TMI 87 - 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 - HELD THAT - As no search and survey has taken place at the premises of the assessee and assessee has voluntarily disclosed the income of the department. Thus, in such case, penalty cannot be imposed. In a recent decision of Supreme Court in the case of Rajkumar Gulab Badgujar 2019 (9) TMI 360 - SC ORDER wherein it is held that wherein the returned income has been accepted u/s 153C and therefore, it is held that in such case, penalty cannot be imposed. Also in PARAG V. CHUGH VERSUS THE DCIT, CI RCLE 1, BARODA. 2019 (10) TMI 1240 - ITAT AHMEDABAD there was no documentary evidence found by the search team suggesting that there was any undisclosed income of the assessee. As such the income disclosed by the assessee was voluntarily without having found any document in the course of search. We also note that there no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the ld. AR for the assessee, thus we are not convinced with the penalty levied by the authorities below. - Decided in favour of assessee.
Issues Involved:
1. Legality of penalty proceedings under Section 271(1)(c) and Section 271AAB. 2. Imposition of penalties on the basis of disclosed additional income during search proceedings. Detailed Analysis: Issue 1: Legality of Penalty Proceedings under Section 271(1)(c) and Section 271AAB The appellant challenged the penalty proceedings initiated under Section 271(1)(c), arguing that the initiation was bad in law as it was unclear whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The appellant contended that both cannot exist simultaneously. The Tribunal noted that the penalty proceedings must be clear and specific about the grounds on which they are initiated. The Tribunal found merit in the appellant's argument and held that the penalty proceedings were indeed bad in law due to the lack of clarity. Issue 2: Imposition of Penalties on the Basis of Disclosed Additional Income During Search Proceedings The appellant contended that the penalties imposed under Section 271(1)(c) and Section 271AAB were unjustified as the additional income was disclosed voluntarily during the return filing in response to the search proceedings. The Tribunal examined the facts and noted that the additional income disclosed by the appellant was not based on any incriminating documents found during the search. The Tribunal referenced the Supreme Court's decision in Rajkumar Gulab Badgujar and the ITAT's decision in Parag V. Chugh vs. DCIT, which supported the appellant's case that penalties cannot be imposed when the disclosed income is accepted under Section 153C without any addition by the Assessing Officer (AO). The Tribunal also reviewed the explanation under Section 271AAB, which defines "undisclosed income" and emphasized that penalties can only be imposed if there is evidence of undisclosed income found during the search. In the appellant's case, no such evidence was found, and the income was disclosed voluntarily. The Tribunal cited the case of ACIT Vs. Marvel Associates, where it was held that penalties under Section 271AAB require the AO to establish undisclosed income based on incriminating material, which was not present in the appellant's case. Conclusion: The Tribunal allowed all four appeals filed by the appellant. It directed the AO to delete the penalties imposed under Section 271(1)(c) and Section 271AAB, emphasizing that the penalties were not justified as the additional income was disclosed voluntarily without any incriminating evidence found during the search. The Tribunal's decision was consistent with the Supreme Court's and ITAT's precedents, reinforcing the principle that penalties require clear grounds and evidence of undisclosed income.
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