2020 (4) TMI 534 - AT - Income Tax

Penalty levied u/s 271AAA - undisclosed income offered by the assessee during the course of assessment proceedings and unexplained cash found during the course of search - HELD THAT - Undisclosed income was neither offered to tax during the course of search nor it was included in the Income Tax Return filed by the assessee. The addition was made while finalizing the assessment order. Thus assessee has not fulfilled any of the conditions enumerated above in Section 271AAA(2) of the Act. Addition for unexplained cash which was found during the course of search at the assessee s residence on 25.11.10, assessee could not give any plausible reply to satisfy the search team as well as the Ld. A.O during the course of assessment proceedings. Assessee has also not challenged this addition before the Tribunal. So as far as unexplained cash is concerned assessee failed to fall in Section 271AAA(2) of the Act. Assessee is liable to pay penalty u/s 271AAA of the Act @10% on the undisclosed income and unexplained cash .- Decided partly in favour of assessee.

Summary

Issues Involved:
Levy of penalty under Section 271AAA of the Income Tax Act 1961 for Assessment Year 2011-12.

Detailed Analysis:

1. Background and Grounds of Appeal:
The appeal was filed by the assessee against the orders of the Commissioner of Income Tax (Appeals) confirming the penalty under Section 271AAA of the Income Tax Act. The assessee contested the penalty on the grounds that it was levied without considering full facts and reasons of the case.

2. Factual Background:
The assessee, engaged in commodity trading, filed a return of income declaring a certain amount. A search was conducted at the assessee's residence, following which assessments were completed, and penalty proceedings under Section 271AAA were initiated.

3. Arguments and Counter-arguments:
The counsel for the assessee argued for the deletion of the penalty, citing previous Tribunal orders supporting the deletion of some additions. The Departmental Representative supported the orders of the lower authorities.

4. Penalty Imposed and Disputed Additions:
The penalty under Section 271AAA was confirmed at ?1,51,178 based on certain additions made by the Assessing Officer. These additions included unexplained investment in jewellery, unexplained cash found during the search, and unexplained income offered during the assessment proceedings.

5. Conditions for Immunity from Penalty:
To avoid penalty under Section 271AAA, the assessee needed to fulfill specific conditions related to admitting undisclosed income, substantiating its source, and paying the tax along with interest.

6. Decision and Rationale:
The Tribunal found that the undisclosed income and unexplained cash were not offered during the search or included in the income tax return. As the conditions for immunity were not met, the penalty was upheld on the undisclosed income and unexplained cash, totaling ?13,11,786, at the rate of 10%.

7. Conclusion:
The Tribunal partly allowed the appeal, sustaining the penalty at ?1,31,179. The decision was pronounced in open court on 07.02.2020.

This detailed analysis covers the issues involved in the levy of penalty under Section 271AAA of the Income Tax Act for the relevant assessment year, providing a comprehensive understanding of the judgment and its implications.