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2020 (9) TMI 144 - AT - Income TaxLevy of penalty u/s 271AAA - Defective notice - income voluntarily disclosed income u/s 132(4) - tax due on the additional income was also paid by the appellant - HELD THAT - Finding of the assessing officer cannot be sustained in view of the binding precedence coupled with the facts that the notice initiating penalty u/s 271AAA is not in accordance with law. Moreover the Assessing Officer has not confronted the assessee to substantiate the manner in which the additional income was earned in the absence of such query. It cannot be inferred that the assessee failed to substantiate the manner which additional income was earned. We therefore direct the Assessing Officer to delete the penalty. - Decided in favour of assessee.
Issues Involved:
1. Legality of the show cause notice issued for the levy of penalty under section 271AAA. 2. Justification for the levy of penalty under section 271AAA when additional income was declared and tax was paid. Issue-wise Detailed Analysis: 1. Legality of the Show Cause Notice Issued for the Levy of Penalty Under Section 271AAA - Ground Raised by the Assessee: The assessee contended that the show cause notice issued for the levy of penalty under section 271AAA was defective as it did not specify the charge against the appellant, making the penalty imposed on the basis of such notice legally unsustainable. - Legal Provisions and Requirements: Sub-section (4) of section 271AAA mandates that the provisions of sections 274 and 275 shall apply to penalty proceedings. This implies that the assessing officer must issue a notice under section 274 and provide a reasonable opportunity of being heard before imposing any penalty. The notice must clearly specify the charge, i.e., the undisclosed income and why the assessee is being denied immunity under sub-section (2) of section 271AAA. - Defects in the Notice: The show cause notices dated 12-03-2014 and 20-02-2018 did not specify the default and charge against the appellant, which falls under section 271AAA. Instead, they were framed under section 271(1)(c) for concealment of particulars of income or furnishing inaccurate particulars of income, making the notice vague and invalid. - Judicial Precedents: The Tribunal cited several cases, including Gillco Developers and Builders (P.) Ltd. v. DCIT, Dr. Rajesh Jain Vs. DCIT, and others, where it was held that penalty proceedings conducted with defective and invalid show cause notices are void ab initio. The Tribunal emphasized that the notice must be specific to the charge under section 271AAA, and failure to do so renders the penalty proceedings invalid. - Conclusion: The Tribunal found that the penalty imposed based on a defective notice is not sustainable. The notice was vague and did not comply with the legal requirements, thus, the penalty of Rs. 6,25,000/- under section 271AAA was quashed. 2. Justification for the Levy of Penalty Under Section 271AAA When Additional Income Was Declared and Tax Was Paid - Ground Raised by the Assessee: The assessee argued that the levy of penalty was unjustified as the additional income was declared in the statement recorded under section 132(4) and the tax due on such income was paid. Moreover, no specific question was asked about the manner of earning such income during the recording of the statement. - Facts of the Case: The assessee accepted additional income during the search and included it in the return for the assessment year 2012-13. The tax due on this additional income was duly paid. The penalty proceedings were initiated on the grounds that the assessee could not substantiate the manner in which the undisclosed income was derived. - Judicial Precedents: The Tribunal referred to several judicial precedents, including ACIT v. Munish Kumar Goyal and Pramod Kumar Jain v. DCIT, which held that if the additional income is declared in the statement under section 132(4) and tax is paid, the assessee is entitled to immunity from penalty under section 271AAA. The Tribunal noted that no specific time limit for payment of tax is prescribed in sub-section (2) of section 271AAA, and it is sufficient if the tax is paid before the conclusion of assessment or penalty proceedings. - Failure to Ask Specific Questions: The Tribunal emphasized that the authorized officer must explain the provisions of the Income-Tax Act in entirety and ask specific questions regarding the manner of earning the additional income. In the absence of such questions, the penalty under section 271AAA cannot be justified. The Tribunal cited cases like Pr. CIT v. Mukeshbhai Ramanlal Prajapati and Pr. CIT v. Emirates Technologies (P.) Ltd., which support this view. - Conclusion: The Tribunal concluded that the levy of penalty was not justified as the additional income was declared, tax was paid, and no specific questions were asked regarding the manner of earning the income. Therefore, the penalty of Rs. 6,25,000/- under section 271AAA was deleted. Final Judgment: Both appeals filed by the assessee were allowed. The Tribunal directed the Assessing Officer to delete the penalty of Rs. 6,25,000/- imposed under section 271AAA for both appellants, concluding that the penalty proceedings were invalid due to defective notices and unjustified as the conditions for immunity were met.
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