2021 (7) TMI 377 - AT - Income Tax

Penalty u/s 271AAA - earning undisclosed income - payment of taxes together with interest, if any, in respect of undisclosed income - HELD THAT - We are of the considered view that the assessee has paid taxes along with interest in due time in accordance with the provisions contained under section 271AAA(2)(iii) of the Act thus the penalty sustained by the ld. CIT (A) is liable to be deleted. However, payment of due taxes along with interest are subject to verification by the AO. Appeal filed by the assessee is allowed

Summary

Issues:
- Confirmation of penalty under section 271AAA of the Income-tax Act, 1961
- Failure to specify and substantiate the manner of earning undisclosed income
- Failure to pay taxes in due time as required by law

Analysis:
1. The appellant sought to set aside the penalty imposed under section 271AAA of the Income-tax Act for the assessment year 2010-11. The penalty was upheld by the Commissioner of Income-tax (Appeals) based on the grounds that the manner of earning undisclosed income was not substantiated and taxes were not paid within the specified time. The Assessing Officer levied a penalty of ?18,49,000, which was challenged through the appeal process.

2. The penalty proceedings were initiated based on the surrender of income amounting to ?1,84,90,000 by the assessee on investments made in cash, jewellery, and properties. The Assessing Officer imposed the penalty as the assessee failed to specify and substantiate the manner in which the undisclosed income was earned. The Commissioner of Income-tax (Appeals) affirmed this decision, leading to the appeal before the Tribunal.

3. The Tribunal analyzed the facts and circumstances of the case, including the surrender of income during a search and seizure operation. The assessee had already paid income tax along with interest on the surrendered amount. The key issues for determination were whether the assessee failed to specify the manner of earning the surrendered income and whether the taxes were paid in due time as required by law.

4. The Commissioner of Income-tax (Appeals) had ruled in favor of the assessee regarding the substantiation of the manner in which the income was earned. However, there was a dispute regarding the timely payment of taxes. The Tribunal examined the tax payments made by the assessee and found discrepancies in the dates of deposit and filing of the return, leading to a penalty imposition.

5. The Tribunal scrutinized the tax payments made by the assessee and compared them with the due dates and total tax liability. After a detailed examination, the Tribunal concluded that the assessee had paid taxes along with interest in due time as per the provisions of section 271AAA(2)(iii) of the Act. Therefore, the penalty imposed by the Commissioner of Income-tax (Appeals) was deemed unjustified and liable to be deleted.

6. The Tribunal allowed the appeal filed by the assessee, stating that the penalty sustained by the Commissioner of Income-tax (Appeals) should be deleted. However, the payment of due taxes along with interest was subject to verification by the Assessing Officer. The decision was pronounced in open court on July 9, 2021.