2021 (12) TMI 1283 - AT - Income Tax

Penalty u/s. 271AAB - commodity profit as falling in the ken of the 'undisclosed income' - HELD THAT - We note that when the search took place on 13.12.2012 in the assessee's premises, the commodity trading which is itself is speculative transaction has been found to be recorded in the 'other document' (seized marked as SA/1) even though not in the books of account of the assessee, which has been retrieved from the assessee's premises and the assessee during search declared u/s. 132(4) ₹ 45.50 lakhs (₹ 45,100/- from commodity trading profit and miscellaneous income of ₹ 4,40,000/-) and filed return of income pursuant to notice u/s. 153A of the Act which includes the total amount of ₹ 63,50,320/- has been declared and the same has been accepted in toto by the AO. We note that since the penalty u/s. 271AAB of the Act is levied on the amount of ₹ 45,50,000/- and since the same has been found at the time of search and which has been found recorded in the 'other document' marked by the search team as SA/1, we are of the considered opinion that for the purpose of 271AAB of the Act, this amount from SA/1 cannot be termed as 'undisclosed income' as per the definition given under Section 271AAB of the Act (supra) and therefore penalty u/s. 271AAB of the Act cannot be levied in this case. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271AAB of the Income-tax Act, 1961 for undisclosed income in commodity trading.

Analysis:
The case involved an appeal against the penalty imposed under section 271AAB of the Income-tax Act, 1961 for undisclosed income in commodity trading. The assessee made a disclosure of ?45,50,000 during a search and seizure action under section 132(1) of the Act. The disclosed profit from commodity trading was not entered in the regular books of account but was found in seized incriminating documents. The Assessing Officer (AO) initiated penalty proceedings under section 271AAB, contending that the undisclosed income was covered by the definition provided in the Act. The assessee argued that the disclosure did not amount to concealment as it was intended to be recorded in the regular books later. The Commissioner of Income-tax (Appeals) upheld the penalty, leading to the appeal before the Appellate Tribunal.

During the proceedings, the assessee's representative highlighted that commodity trading was conducted for the first time in the assessment year under consideration and was not a regular business activity. The transactions were recorded in a separate document seized during the search, and the profit was disclosed in the return of income. The representative argued that since the commodity profit was recorded in the seized document, it did not qualify as undisclosed income under section 271AAB. The Tribunal agreed with the assessee, noting that the disclosed amount was found in the 'other document' marked as SA/1, retrieved during the search. As per the definition provided in section 271AAB, the Tribunal concluded that the disclosed income from commodity trading could not be considered undisclosed income for penalty purposes. Therefore, the penalty levied by the AO and confirmed by the CIT(A) was canceled, and the appeal of the assessee was allowed.

In conclusion, the Tribunal's decision emphasized that the specific circumstances of the case, where the disclosed income from commodity trading was found in a separate document seized during the search, did not meet the criteria of undisclosed income as defined under section 271AAB of the Income-tax Act. The Tribunal's analysis focused on the interpretation of the legal provisions and the factual details to determine the applicability of the penalty in the given situation.