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2022 (10) TMI 603 - AT - Income TaxPenalty u/s 271(1)(c) - defective Notice u/s 274 - non striking off the irrelevant portion of the printed show cause notice - HELD THAT - On conjoint reading of the provision of law for levy of penalty and the definition of undisclosed income and the facts as narrated here in above that AO has not proved that whether the advance in question are in fact taken or given by the assessee or Mr. Anand Singhal. Not only that the revenue has not done any exercise to confirm with Shri Subhas Ji that whether the money in question is related to the person named in or not? Since the assets being the advances itself is not tested and statement recorded at the time search where in the assessee has categorically submitted that the money in fact taken and not given and the same is not pertain to the assessee. In the assessment proceeding this very basic fact is not establish and in the absence of this fact being not confirmed we are of the considered view that in light of these facts being not clear the levy of the penalty under section 271(1)(c) is not justified on the addition and therefore the same is required to be deleted. Surrender made after the conceled income was detected by the department cannot be held to be voluntary or bonafide but under compulsion - As in the case of S.P.Goel vs DCIT 2002 (4) TMI 952 - ITAT MUMBAI Mere entry on a loose sheet of paper does not indicate undisclosed income unless circumstantial evidence in the form of extra cash jewellery or investment outside books is found in the case of Ashwini Kumar 1991 (8) TMI 142 - ITAT DELHI-D In the case of dumb document revenue should collect necessary evidence that the figures represent incomes earned by the assessee. In the case of JCIT vs West Bengal Trading Agency 2004 (1) TMI 303 - ITAT CALCUTTA-B . There has to be direct or circumstantial material to establish that the intention expressed in the seized document/books has actually been implemented and in the case of P.R.Patel 2000 (5) TMI 1070 - ITAT MUMBAI No addition can be made on the basis of a seized documents which do not bear the name of assessee. Based on judicial precedent and the detailed discussion made here in above the penalty levied on the sustained addition is deleted and in terms of these observations ground raised by the assessee is allowed.
Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Validity of the penalty order passed without striking off the irrelevant portion of the printed show cause notice. 3. Judicial consistency in passing the penalty order. 4. Recording of satisfaction with reference to concealment of income or furnishing inaccurate particulars of income. 5. Justification for the penalty amount imposed. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue revolves around the imposition of a penalty of Rs. 1,85,400/- on the assessee for alleged concealment of income. The original return filed declared an income of Rs. 8,06,240/-. A search revealed undisclosed advances amounting to Rs. 6,00,000/- which were added to the income by the Assessing Officer (AO). The AO justified the penalty by stating that the assessee admitted the advances were from undisclosed income and failed to provide a valid explanation. The penalty was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] and further confirmed by the ITAT, which allowed the set-off of this addition in the subsequent assessment year. 2. Validity of the Penalty Order Passed Without Striking Off the Irrelevant Portion of the Printed Show Cause Notice: The assessee argued that the penalty order was invalid as the AO did not strike off the irrelevant portion of the printed show cause notice, which is a procedural requirement. However, this technical ground was not pressed by the assessee during the hearing, and thus, it was dismissed. 3. Judicial Consistency in Passing the Penalty Order: The assessee contended that the penalty order was against the principles of judicial consistency. It was argued that the addition was based on rough notings on loose papers which did not conclusively indicate undisclosed income. The CIT(A) and ITAT confirmed the penalty on the grounds that the assessee himself admitted to the undisclosed advances during the search proceedings and in subsequent affidavits. The penalty was deemed consistent with judicial precedents, including the Supreme Court's decision in MAK Data P. Ltd. v. CIT-II, which held that voluntary disclosure does not absolve an assessee from penalty under Section 271(1)(c). 4. Recording of Satisfaction with Reference to Concealment of Income or Furnishing Inaccurate Particulars of Income: The assessee argued that the penalty order was void ab initio as no satisfaction was recorded with reference to concealment of income or furnishing inaccurate particulars of income. The AO's satisfaction was based on the assessee's own admission of undisclosed income during the search and in subsequent affidavits. The CIT(A) and ITAT found that the AO had sufficient grounds to levy the penalty, as the assessee failed to substantiate the explanation and the documents seized during the search indicated undisclosed income. 5. Justification for the Penalty Amount Imposed: The penalty amount of Rs. 1,85,400/- was imposed on the addition of Rs. 6,00,000/- for undisclosed advances. The assessee argued that the addition was based on a dumb document and that the penalty should not be imposed merely on the basis of a voluntary surrender made to avoid prolonged litigation. The ITAT found that the AO did not conduct further inquiries to substantiate the addition and relied solely on the assessee's admission. The ITAT concluded that the penalty was not justified as the addition was based on assumptions and the seized document did not conclusively prove undisclosed income. Conclusion: The ITAT allowed the appeals, deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment years 2010-11, 2011-12, and 2012-13. The decision was based on the grounds that the addition was not conclusively proven to be undisclosed income and was based on the assessee's voluntary admission without corroborative evidence. The appeals were allowed, and the penalty orders were set aside.
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