2020 (4) TMI 461 - AT - Income Tax

Penalty u/s 271AAB - undisclosed income - statement as recorded u/s. 132(4) - CIT(A) deleted the penalty - HELD THAT - CIT(A) has nowhere examined the relevant facts qua assessee s alleged undisclosed income as to whether the same represented any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other document in the light of the foregoing explanation. We also notice that their lordships judgment in Sudarshan Silk Mills 2008 (4) TMI 5 - SUPREME COURT does not deal with the impugned statutory provision but involved sec.271(1)(c) penalty proceedings only. We therefore reverse the CIT(A) s lower appellate findings under challenge to this effect in principle. Whether there is any undisclosed income involved going by sec. 271AAB Explanation (c) or not? - A perusal of the case file suggests that the assessee s sec. 132(4) disclosure made during the course of search declared total income involving capital introduced, profit as per P L account, capital in the name of sundry creditors, profit on sales @ 5%, commodity profit with miscellaneous and other income etc., involving corresponding sum(s). Out of this, the assessee s books had duly recorded initial capital, sundry creditors and miscellaneous income and the balance amount ( involving commodity profits ) stood not recorded in the regular books of account u/s. 271AAB explanation- (c)(A) of the Act. Mr. Tulsiyan fails to dispute that this latter undisclosed income component has seen light of the day due to search wherein the corresponding seized documents. AO was very well justified in invoking the impugned penal provision qua the assessee s undisclosed income of ₹690,69,994/- than the entire disclosure of ₹16,05,25,000/-. Revenue has failed to pin-point any material in the nature of seized documents indicating the remaining three components of initial capital, sundry creditors and miscellaneous income (supra) which could be held to be undisclosed income going by sec.271AAB Explanation (c) AO s action penalizing the assessee qua the said disclosed / duly recorded income is found to be not sustainable therefore. We have ourselves assumed our jurisdiction of the final fact-finding authority under the provision of the Act to decide upon correctness of impugned entire penalty than remitting the issue back to the AO or the CIT(A) for afresh adjudication. The Assessing Officer is now directed to frame consequential computation of the impugned penalty as per law qua the assessee s undisclosed income of ₹690,69,994/-only. Ordered accordingly.

Summary

Issues involved:
1. Appeal against deletion of penalty under sec. 271AAB for assessment year 2013-14.

Detailed Analysis:

Issue 1: Appeal against deletion of penalty under sec. 271AAB

The Revenue's appeal sought to reverse the action of the CIT(A) in deleting the penalty of &8377;16052500/- imposed under sec. 271AAB for assessment year 2013-14. The CIT(A) based his decision on the definition of 'undisclosed income' as per Explanation (c) to sec. 271AAB. The CIT(A) emphasized that the mere statement recorded under sec. 132(4) without identifiable income, assets, or specific entries in books of account cannot attract penalty provisions. The CIT(A) highlighted that the Explanation (c) requirements were not met in this case, rendering the penalty baseless. The appellant had voluntarily disclosed the income from the search statement in the return filed under sec. 153A, but the actual existence of this income was questioned due to lack of specific evidence. The CIT(A) also referenced the Supreme Court's decision in Sudarshan Silk Mills case, stating that penalties for concealment based solely on statements without supporting evidence are not justified.

Moving to the arguments presented, the CIT-DR contended that the CIT(A) erred in deleting the penalty, emphasizing that the Sudarshan Silk Mills judgment was not applicable to the current case. On the other hand, the Respondent's representative supported the CIT(A)'s decision, asserting that the penalty was wrongly imposed by the Assessing Officer. The Tribunal analyzed the facts and provisions, noting that the CIT(A) did not assess whether the undisclosed income met the criteria specified in Explanation (c) of sec. 271AAB. The Tribunal observed that the Sudarshan Silk Mills case dealt with a different penalty provision, not the one under consideration. Consequently, the Tribunal reversed the CIT(A)'s decision, emphasizing the need to evaluate if the undisclosed income aligned with the statutory definition.

Further examination revealed that the undisclosed income declared during the search included various components, some of which were duly recorded in the books of account, while others remained unrecorded. The Tribunal determined that only the unrecorded portion of the income, amounting to &8377;69069994/-, qualified as undisclosed income under Explanation (c) of sec. 271AAB. The Tribunal clarified that the penalty was justified only concerning this undisclosed portion, and the Assessing Officer was directed to compute the penalty accordingly. The Tribunal asserted its authority as the final fact-finding body under the Act, resolving the penalty issue conclusively without remitting it back for reconsideration.

In conclusion, the Tribunal partially allowed the Revenue's appeal, directing the computation of the penalty based on the specific undisclosed income component identified during the search operation.

This detailed analysis provides an in-depth understanding of the legal judgment, focusing on the issues raised in the appeal against the deletion of the penalty under sec. 271AAB for the relevant assessment year.