2018 (4) TMI 1995 - AT - Income Tax

Penalty u/s 271AAA(2) - assessee declared the surrendered amount under the head additional income which was accepted by the Revenue - as alleged absence of specific query raised by the Authorized Officer - HELD THAT - Identically in Crossings Infrastructure P. Ltd. 2014 (2) TMI 131 - ALLAHABAD HIGH COURT where Revenue authorities, passed penalty order without showing as to how and in not manner conditions of section 271AAA(2) had not been complied with, imposed penalty. The penalty order was set aside. In the absence of specific query raised by the Authorized Officer, while recording the statement u/s 132(4) of the Act about the manner in which undisclosed income was derived, the Ld. AO was not justified in imposing penalty u/s 271AAA - See Brij Bhushan Singhal 2015 (3) TMI 797 - ITAT DELHI While initiating the penalty proceedings the Ld. AO nowhere stated as to why the penalty proceedings were initiated and whether the conditions laid down in the section were satisfied or not. AO without assigning any reason and merely on the basis of surrender made by the assessee initiated penalty proceedings. The amount of surrender was made by the assessee on the basis of certain loose papers found and seized during search operation upon tecpro group at Gurgaon. There is a further observation that these papers were dictated by the search team and further from the statement tendered by the assessee there is a condition that the surrender made by the assessee shall be without penal action by the Department whatsoever and the surrender was made to buy peace and to avoid litigation with the Department in the spirit of cooperation. As per case Suresh Chander Mittal 2001 (6) TMI 63 - SC ORDER we find merit in the conclusion drawn by the Ld. CIT (A) and confirm the same, resultantly the appeal of the Revenue is dismissed.

Summary

Issues Involved:

1. Validity of the penalty imposed under Section 271AAA of the Income Tax Act, 1961.
2. Compliance with conditions under Section 271AAA(2) for immunity from penalty.
3. Interpretation of judicial pronouncements related to penalty proceedings under Section 271AAA.

Issue-wise Detailed Analysis:

1. Validity of the penalty imposed under Section 271AAA of the Income Tax Act, 1961:

The core issue in this case was the imposition of a penalty amounting to Rs. 1,96,70,670 under Section 271AAA of the Income Tax Act, 1961. The penalty was levied by the Assessing Officer (AO) on the basis of the undisclosed income amounting to Rs. 19,77,06,696 which was surrendered by the assessee during a search operation. The AO imposed the penalty at 10% of the undisclosed income, as per the provisions of Section 271AAA. However, the First Appellate Authority deleted the penalty, leading to the Revenue's appeal.

2. Compliance with conditions under Section 271AAA(2) for immunity from penalty:

The assessee contended that the conditions for immunity from penalty under Section 271AAA(2) were satisfied. The First Appellate Authority observed that the penalty was deleted because the AO did not specify how the conditions of Section 271AAA(2) were not met. Specifically, the AO failed to demonstrate the manner in which the undisclosed income was derived, a crucial requirement for imposing penalty under this section. The Tribunal noted that the assessee had declared the surrendered amount in the return of income and that the penalty proceedings were initiated without a clear rationale or evidence of non-compliance with the statutory conditions.

3. Interpretation of judicial pronouncements related to penalty proceedings under Section 271AAA:

The Tribunal relied on several judicial precedents, including the cases of Brij Bhushan Singhal vs. ACIT and Neeraj Singhal vs. ACIT, which established that a penalty under Section 271AAA cannot be imposed in the absence of a specific query by the Authorized Officer regarding the manner of deriving undisclosed income during the statement recorded under Section 132(4). Moreover, the Tribunal referred to the decision in CIT vs. Suresh Chander Mittal, emphasizing that a penalty cannot be imposed merely on the basis of a surrender made by the assessee without further inquiry or justification. The Tribunal concluded that the penalty proceedings were not justified as the AO failed to substantiate the reasons for initiating such proceedings, and the surrender was made in good faith to avoid litigation.

In conclusion, the Tribunal upheld the First Appellate Authority's decision to delete the penalty, finding that the Revenue did not provide sufficient grounds or evidence to justify the imposition of penalty under Section 271AAA. The appeal by the Revenue was dismissed, affirming the assessee's compliance with the statutory requirements for immunity from penalty.