2024 (10) TMI 251 - AT - Income Tax

Penalty u/s 271AAB - treating an amount included in the ROI as undisclosed income susceptible to penalty - search in the present case was carried out u/s 132 on assessee and assessment was accordingly carried out as per provision of section 153A making additions u/s 50C - as per DR search not taken place, the assessee would not have disclosed the income on account of LTCG and cash transaction declared and included in the return of income - HELD THAT - On perusal of the assessment order or penalty order, it is seen that there is no reference to any statement recorded u/s 132(4) of the Act which may show any kind of admission towards so called undisclosed income. Needless to say, the admission of undisclosed income of alleged undisclosed income (with some further conditions with which, we are not personally concern) is the fulcrum on which action under Section 271AAB(1A) of the Act is based. In the absence of such admission imposition of penalty @ 30% of the so called undisclosed income under clause (a) of Section 271AAB(1A) of the Act is not justified. Besides, the case of the assessee does not fall in the definition of undisclosed income provided in the Explanation appended to Section 271AAB - The assessee claims to be not obligated of law to maintain the books of accounts and the income declared in the return of income arising from entries in respect of LTCG and cash transactions has not been alleged to be false by the Revenue. Significantly, the LTCG in question is otherwise taxable in law in so far as the A.Y. 2021-22 is concerned. The transactions are routed through Banking Channel and advance tax has also been paid. Under these circumstances, income from LTCG cannot be treated as undisclosed income by any stretch of imagination. In the identical fact situation, the Co-ordinate Bench in the case of wife of assessee (Tanya Jaiswal) 2024 (9) TMI 425 - ITAT DELHI has affirmed the view of the CIT(A). The issue thus stands covered in favour of the assessee.

Summary

Issues:
1. Imposition of penalty under Section 271AAB of the Income-tax Act concerning Assessment Year 2021-22.
2. Whether the penalty imposed by the Assessing Officer was justified.
3. Appeal against the relief granted by the CIT(A) deleting the penalty.
4. Comparison with a similar case involving the wife of the assessee.
5. Interpretation of undisclosed income and its applicability in the case.

Analysis:

Issue 1: Imposition of penalty under Section 271AAB
The appeal arose from the First Appellate order concerning the penalty order dated 26.09.2022 under section 271AAB of the Income-tax Act for Assessment Year 2021-22. The Assessing Officer invoked penalty proceedings under Section 271AAB and imposed a penalty of 30% on the undisclosed income of the assessee.

Issue 2: Justification of Penalty
The CIT(A) found that the ingredients of Section 271AAB were not fulfilled, leading to the deletion of the penalty. The CIT(A) noted that the appellant had declared the additional income in the return of income without any incriminating material found during the search. The CIT(A) held that the disclosed income could not be treated as undisclosed income under the Act.

Issue 3: Appeal Against Relief Granted
The Revenue appealed the relief granted by the CIT(A), challenging the deletion of the penalty under Section 271AAB. The Revenue contended that the assessee would not have disclosed the income if the search had not taken place, arguing against the CIT(A)'s decision.

Issue 4: Comparison with Similar Case
The assessee's counsel referred to a case involving the wife of the assessee, where a similar penalty was imposed and later deleted by the Tribunal. The counsel argued that the identical factual situation had already been examined by the Tribunal, supporting the assessee's case.

Issue 5: Interpretation of Undisclosed Income
The Tribunal analyzed the definition of undisclosed income under Section 271AAB, emphasizing the lack of seized material or false entries in the books of account. The Tribunal concluded that the disclosed income, including LTCG and cash transactions, did not meet the criteria of undisclosed income, as defined in the Act.

In conclusion, the Tribunal dismissed the Revenue's appeal, citing that the prerequisites of Section 271AAB were not satisfied in the case. The Tribunal highlighted the absence of admission of undisclosed income during the search and the lawful declaration of income by the assessee. The decision was supported by a similar case involving the wife of the assessee, where the penalty was also deleted. The Tribunal upheld the CIT(A)'s decision, emphasizing the statutory discretion of the Assessing Officer in imposing penalties under Section 271AAB.