2025 (1) TMI 273 - AT - Income Tax

Unexplained cash found during search over and above the income surrendered by the assessee u/s 132(4) - CIT(A) held the addition will lead to double addition - HELD THAT - Assessee has categorically admitted in the statement recorded u/s 132(4) that the advance is part of the surrendered income of Rs. 9.00 Crores in the relevant year. The probability of stating truth in the statement recorded u/s 132(4) is always more for usual reasons. Prima-facie, the statement recorded u/s 132(4) of the act has to be considered true and complete unless proved otherwise. Since the Revenue has not brought any material on the record to contradict the finding of the CIT(A) and the inference emerged from the statement recorded under section 132(4) therefore, we are of the considered view that there is no need to interfere with the findings of the Ld. CIT(A). Consequentially, the Quantum appeal filed by the Revenue stands dismissed. Penalty @ 30% u/s 271AAB(1)(a) - assessee surrendered the income during the course of search proceedings - non specification of clear charge - as per revenue assessee did not fulfill the terms and conditions laid down under section 271AAB(1)(a) and the assessee has also not divulged the source and manner of earning such income - HELD THAT - As no specific charge has been mentioned in the penalty notice issued u/s 271AAB following the decision in the case of Jaina Marketing Associates 2024 (3) TMI 1007 - ITAT DELHI we delete the penalty imposed by the AO on the technical ground. Merely issuing notice in general proforma will negate the very purpose of natural justice. Hon'ble Apex Court in the case of Dilip N Shrof 2007 (5) TMI 198 - SUPREME COURT held that the quasi-criminal proceedings u/s 271(1)(c) ought to comply with the principles of natural justice - Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment involves two primary appeals: a quantum appeal and a penalty appeal. The core legal questions considered by the Appellate Tribunal ITAT Delhi are:

• Whether the addition of Rs. 2 Crores by the Assessing Officer (AO) as unexplained cash was justified or if it constituted a double addition, given the surrendered income of Rs. 9 Crores by the assessee.
• Whether the penalty imposed under section 271AAB at 30% by the AO was appropriate, or if the CIT(A)'s reduction to 10% was justified.
• Whether the penalty notice issued by the AO was valid, given the alleged lack of specificity regarding the charge under section 271AAB.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition of Rs. 2 Crores as Unexplained Cash

• Relevant Legal Framework and Precedents: The addition was made under section 69A of the Income Tax Act, which deals with unexplained money. The CIT(A) and Tribunal considered precedents regarding the treatment of surrendered income and the concept of double addition.
• Court's Interpretation and Reasoning: The Tribunal agreed with the CIT(A) that the Rs. 2 Crores was part of the Rs. 9 Crores already surrendered by the assessee. The Tribunal emphasized that the statement recorded under section 132(4) should be considered true unless contradicted by evidence.
• Key Evidence and Findings: The Tribunal considered the statement recorded under section 132(4) where the assessee admitted that the Rs. 2 Crores was part of the surrendered amount. No contrary evidence was presented by the Revenue.
• Application of Law to Facts: The Tribunal found that the addition of Rs. 2 Crores would result in double taxation of the same income, which is impermissible.
• Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the Rs. 2 Crores was separate from the surrendered income due to lack of evidence.
• Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the Rs. 2 Crores addition, dismissing the Revenue's quantum appeal.

Issue 2: Penalty Imposed Under Section 271AAB

• Relevant Legal Framework and Precedents: Section 271AAB pertains to penalties on undisclosed income discovered during a search. The Tribunal considered precedents regarding the clarity required in penalty notices.
• Court's Interpretation and Reasoning: The Tribunal found that the penalty notice was vague and did not specify the charge, which is a requirement under the law.
• Key Evidence and Findings: The penalty notice failed to specify whether the penalty was under clause (a), (b), or (c) of section 271AAB, rendering it defective.
• Application of Law to Facts: The Tribunal applied the principle that penalty notices must clearly convey the charge to the assessee, which was not done in this case.
• Treatment of Competing Arguments: The Tribunal favored the assessee's argument regarding the defective notice over the Revenue's position.
• Conclusions: The Tribunal deleted the penalty on technical grounds, dismissing the Revenue's penalty appeal and allowing the assessee's cross-objection.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The statement recorded under section 132(4) of the Act has to be considered true and complete unless proved otherwise."
• Core Principles Established: The Tribunal reinforced the principle that a statement under section 132(4) is presumed true unless contradicted by evidence. It also highlighted the necessity for specificity in penalty notices under section 271AAB.
• Final Determinations on Each Issue: The Tribunal dismissed the Revenue's quantum appeal, confirming that the Rs. 2 Crores was part of the surrendered Rs. 9 Crores. It also dismissed the penalty appeal on technical grounds due to the defective notice, allowing the assessee's cross-objection.

The judgment underscores the importance of clear and specific communication in penalty notices and the adherence to established principles regarding the treatment of surrendered income during search proceedings.