2022 (6) TMI 563 - AT - Income Tax

Penalty imposed u/s 271AAA - cash found in search as well as the unexplained jewellery - search and seizure operation un/s 132 was conducted on the assessee, wherein, information was found that the assessee was operating a foreign bank account at HSBC Geneva - cash found in search seized - as per revenue the assessee would not have surrendered the cash found had search and seizure operation not taken place - HELD THAT - Penalty under section 271AAA(1) cannot be imposed in a case where the assessee has offered the undisclosed income in the statement recorded under section 132(4) of the Act, specifying the manner in which such income has been derived and if the assessee pays the tax along with interest of such income. In the facts of the present case, undisputedly, the assessee has offered the cash found as income in the statement recorded under section 132(4) of the Act. It is also a fact that the assessee has paid the tax on such income. The only condition, according to the department, which has not been fulfilled is the assessee has not specified the manner in which such income has been derived. On a perusal of the statement recorded under section 132(4) of the Act, we have observed that in response to a question asked by the authority concerned, the assessee came forward to offer the money found in the bank account as well as in cash as income. It is observed, the authority recording statement did not pose any specific query to the assessee to explain the mode and manner in which such undisclosed income was derived. Thus, in course of search and seizure operation when the assessee came forward and offered certain income to show his bonafide and ultimately followed it up by actually offering such income to tax, in our view, the assessee should be given the benefit of the exceptions provided under sub-section (2) of section 271AAA. In any case of the matter, it is a fact on record that the assessee is no more and has been substituted by his legal heir, in course of proceeding before us. Thus we delete the penalty imposed under section 271AAA of the Act. Grounds of assessee are allowed.

Summary

Issues:
Penalty under section 271AAA of the Income-tax Act, 1961 for assessment year 2012-13.

Analysis:
The appeal arose from an order confirming a penalty imposed under section 271AAA of the Income-tax Act, 1961 for the assessment year 2012-13. The assessee, a resident individual, had filed a return of income declaring Rs.9,87,75,340. A search operation revealed undisclosed income from a foreign bank account and seized cash and jewellery. The Assessing Officer added undisclosed interest and unexplained jewellery to the total income, initiating penalty proceedings. The penalty was imposed, leading to an appeal. The Commissioner (Appeals) deleted the penalty related to unexplained jewellery but upheld it for the cash found during the search, citing lack of specific details on its origin.

The main contention was whether penalty under section 271AAA could be imposed when the assessee had voluntarily disclosed the cash found during the search. The provision states that no penalty applies if the assessee admits undisclosed income, specifies its derivation, substantiates it, and pays the tax with interest. The Tribunal observed that the assessee had offered the cash as income during the search and paid the tax. While the manner of derivation was not explicitly specified, the Tribunal noted that no specific query was made during the statement recording. Given the voluntary disclosure and tax payment, the Tribunal deemed the penalty inapplicable, especially since the unexplained jewellery penalty was deleted.

The Tribunal emphasized the need for a compassionate view due to the assessee's demise, now represented by a legal heir. Citing precedents and the lack of specific questioning during the statement recording, the Tribunal concluded that the penalty should be deleted. The decision was based on the assessee's voluntary disclosure and tax payment, warranting an exception under section 271AAA(2) of the Act. Ultimately, the Tribunal allowed the appeal, deleting the penalty imposed under section 271AAA for the assessment year 2012-13.