2021 (10) TMI 1190 - AT - Income Tax

Penalty u/s 271AAA(2) - Proof of admission of undisclosed income u/s 132(4) - primary onus - onus is on the Revenue to raise appropriate questions towards manner of deriving undisclosed income and substantiation thereof - HELD THAT - As the factual position discernable from the record, it is manifest that the assessee has not failed to specify the manner of deriving undisclosed income perse in the absence of any question directed towards the assessee/deponent of the statement in this regard. The substantiation of the manner of deriving undisclosed income naturally has not been called into question by the Revenue. Assessee has replied to the queries raised while recording the statement as called for. The Revenue does not appear to have quizzed the assessee for satisfying the manner in which the purported undisclosed income has been derived. The income considered as undisclosed income under s. 132(4) of the Act was duly incorporated in the return filed pursuant to search. Therefore, the Revenue, in our view, now cannot plead deficiency on the part of the assessee to specify the manner which has not been called into quest ion at the time of search or even at the stage of the assessment. AO or CIT(A) has not pointed out any query which remained unreplied or evaded in the course of search or post search investigation. Therefore, looking from any angle, it is difficult to endorse the action of the Revenue - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under Section 271AAA of the Income Tax Act, 1961 for AY 2012-13.

Analysis:
The appeal was filed against the penalty order imposed by the Assessing Officer (AO) under Section 271AAA of the Income Tax Act, 1961. The assessee, engaged in the business of land developers and contractors, admitted unaccounted income during a search conducted at their premises. The penalty amounting to ?20,74,830 was imposed by the AO, claiming that the conditions specified in Section 271AAA for exoneration from penalty were not satisfied by the assessee. The CIT(A) confirmed the AO's action, stating that the appellant failed to substantiate the manner in which undisclosed income was derived, as required by the Act. The appellant's representatives were deemed aware of the legal requirements, and the appellant did not utilize the opportunity to explain the source of assets found during the search. The CIT(A) upheld the penalty, leading to an appeal before the Tribunal.

The Tribunal considered the submissions of both parties. Section 271AAA(2) of the Act requires the assessee to admit undisclosed income, pay taxes on it, and specify the manner in which it was derived. The onus is on the Revenue to question the manner of deriving undisclosed income, shifting the burden to the assessee to satisfy the requirements for exemption. In this case, the Tribunal found that the Revenue did not question the manner of deriving undisclosed income during the search or assessment. The assessee had incorporated the undisclosed income in the return filed after the search. As no queries were left unanswered or evaded by the assessee, the Tribunal concluded that the Revenue's action was not justified. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the Revenue failed to establish the non-compliance with the requirements of Section 271AAA of the Act. The decision highlighted the importance of the Revenue's role in questioning and substantiating undisclosed income, ultimately leading to the deletion of the penalty imposed on the assessee for AY 2012-13.