2021 (1) TMI 532 - AT - Income Tax

Levy of penalty u/s 271AAA - concealed income on account of excess claim of depreciation - withdrawal of excess claim of depreciation during assessment proceeding post to search on 05.05.2011 carried out u/s 132 - HELD THAT - We find that the Ld. A.O has not mentioned specific charge in the notice as provided u/s 271AAA r.w.s. 274 of the Act. Rather Ld. A.O has merely mentioned one line imported from section 271(1)(c) of the Act which in the instant case is not applicable on the assessee. On going through the above reproduced defective notice we find that similar notice was issued to another group concern of the assessee M/s Keti Toll Infrastructure Ltd wherein penalty u/s 271AAA of the Act was deleted by this Tribunal. So is the notice being defective and not in accordance with law has been issued in the case of assessee for Assessment Year 2011-12 and 2012-13 the penalty proceedings u/s 271AAA are held to be void ab initio. We accordingly delete the penalty levied u/s 271AAA. Excess claim of depreciation - Firstly the excess depreciation claimed pertains to the specified year under consideration, secondly the alleged undisclosed income in the form of excess depreciation was admitted during the course of search, thirdly assessee has substantiated the manner in which income has been derived and lastly as regards the demand of tax the same is not applicable since there was no tax on surrender of depreciation claim withdrawn during the assessment proceedings since there were losses. We are of the view that on merit also the assessee deserves the relief and we accordingly allow the grounds raised on merits by the assessee and delete the penalty u/s 271AAA - Decided in favour of assessee.

Summary

Issues Involved:
Levy of penalty under section 271AAA of the Income Tax Act for Assessment Years 2011-12 and 2012-13 based on the excess claim of depreciation during assessment proceedings post a search operation.

Analysis:

Issue 1: Defective Notice and Legal Grounds for Penalty Deletion
The appeals were filed against the orders confirming the penalty under section 271AAA of the Act. The counsel for the assessee argued that the penalty should be deleted due to a defective notice that did not specify the charge under section 271AAA. The Tribunal found that the notice issued was defective and not in accordance with the law, similar to other cases, rendering the penalty proceedings void ab initio. Consequently, the penalty levied was deleted on this legal ground.

Issue 2: Merits of the Case and Immunity from Penalty
Regarding the merits of the case, the excess claim of depreciation was withdrawn during the assessment proceedings post a search operation. The appellant admitted the undisclosed income and specified the manner in which it was derived, substantiated the manner of deriving the income, and paid the tax and interest. As there was no tax on the withdrawn depreciation claim due to losses, the Tribunal held that the assessee deserved relief. Therefore, the penalty under section 271AAA was deleted for both Assessment Years 2011-12 and 2012-13 based on merit.

Conclusion:
The Tribunal allowed the appeals of the assessee for both Assessment Years 2011-12 and 2012-13, deleting the penalty under section 271AAA of the Act. The decision was based on the defective notice issued and the merits of the case where the assessee qualified for immunity from penalty as per the provisions of the Act.