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2021 (7) TMI 1076 - AT - Income TaxPenalty order passed u/s 271AAA - disclosure of undisclosed jewellery and cash - HELD THAT - We find that in the assesses case, the search was initiated u/s 132 of the Act on 07.10.2009 which was much before i.e 01.07.2012. At this juncture, it will be appropriate to refer to the provisions of Sec. 271AAA of the Act which are applicable for the cases were the search has been initiated or after 01.06.2007 but before 01.07.2012. The levy of penalty in not automatic and not mandatory. In the quantum appeal, the Hon ble Tribunal has considered the accumulation of jewellary and the rate of jewellary is raising and the assessee has taken into account the value of jewellary in the A.Y.2010-11 and filed the return of income. Further there is no material to suggest that it was purchased in the relevant assessment year. Therefore, considering the facts circumstances, provisions and the ratio of the decision of the Hon ble Tribunal. We set aside the order of the CIT(A) and direct the assessing officer to delete the penalty and allow the grounds of the appeal in favour of the assessee.
Issues Involved:
1. Whether the CIT(A) was justified in deciding the appeal without affording a reasonable opportunity of being heard. 2. Whether the CIT(A) was justified in upholding the penalty order passed under Section 271AAA. 3. Whether the CIT(A) was justified in upholding the AO's assumption of jurisdiction under Section 271AAA. 4. Whether the CIT(A) was justified in upholding the penalty order despite the ITAT's decision on the quantum appeal. 5. Whether the CIT(A) was justified in upholding the penalty order based on Adhoc commission income without evidence. 6. Whether the CIT(A) erred in confirming the penalty order without appreciating that the appellant had discharged his primary onus. Detailed Analysis: 1. Reasonable Opportunity of Being Heard: The assessee argued that the CIT(A) decided the appeal without providing a reasonable opportunity to be heard. However, the judgment does not specifically address this issue in detail, focusing instead on the substantive grounds of the penalty. 2. Upholding Penalty under Section 271AAA: The core issue was the levy of penalty under Section 271AAA. The AO initiated penalty proceedings because the assessee did not provide complete details of undisclosed income. The CIT(A) upheld the AO's decision, but the Tribunal found that the penalty was not tenable. The Tribunal noted that the jewellery had been accumulated over decades and was declared in the return of income for AY 2010-11. There was no evidence suggesting the jewellery was purchased in the relevant assessment year, and thus, the penalty was not justified. 3. Assumption of Jurisdiction under Section 271AAA: The Tribunal examined the provisions of Section 271AAA, applicable for searches initiated between 01.06.2007 and 01.07.2012. It emphasized that penalties under this section require specific conditions: admission of undisclosed income during the search, specifying the manner of income derivation, substantiating the manner, and paying taxes with interest. The Tribunal found that these conditions were not met, thus questioning the jurisdictional basis for the penalty. 4. ITAT's Decision on Quantum Appeal: The Tribunal referred to its earlier decision in the quantum appeal, where it had deleted additions related to jewellery and cash, recognizing that the jewellery was accumulated over years and not necessarily purchased in the relevant year. This decision impacted the penalty proceedings, as the foundation for the penalty (the additions) was removed. 5. Adhoc Commission Income Without Evidence: The Tribunal noted that the AO's additions were based on presumptions and surmises without adverse material evidence. The penalty cannot be levied on such adhoc additions. The Tribunal highlighted that the assessee had provided complete information during assessment proceedings, further weakening the basis for the penalty. 6. Discharge of Primary Onus: The Tribunal found merit in the assessee's argument that he had discharged his primary onus by declaring the jewellery in the return of income and paying taxes. The Tribunal emphasized that penalty provisions should be interpreted strictly and not in an inclusive manner that broadens their scope unjustifiably. Conclusion: The Tribunal concluded that the penalty under Section 271AAA was not automatic or mandatory and must be justified with clear evidence. Given the facts and circumstances, including the earlier quantum appeal decision, the Tribunal directed the deletion of the penalty and allowed the assessee's appeal. Order: The appeal filed by the assessee was allowed, and the penalty order was set aside. The Tribunal directed the AO to delete the penalty. The order was pronounced in the open court on 28.06.2021.
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