2025 (2) TMI 917 - AT - Income Tax

Penalty order u/s 271AAB - Disclosure made in search proceedings - DR held that in case there was no search no disclosure would have been made and a similar mention is also made in the assessment order - AR re-emphasized the fact that the assessee had voluntarily disclosed the income and the income was not represented by any money bullion jewellery or other valuable article or thing or any entry in the books of account or other transactions found in the course of search - HELD THAT - As gone through the statement of Poonam Mohta recorded on 08.05.2015 produced in the course of proceeding before us and a perusal of the same shows that though certain valuables were found in the locker of the assessee however the assessee had not made any disclosure in the statement recorded while the locker no. 932A was subjected to search and seizure on 08.05.2020. Hence as the disclosure did not relate to the finding of the search and was made suo motu and though the Ld. AO has referred to certain seized documents in the penalty order but he has not corelated how the disclosure of Rs. 50 lakhs had any reference to the seized documents; therefore the disclosure could not be treated as undisclosed income for the purpose of imposition of penalty u/s 271AAB and the penalty imposed is liable to be cancelled. Hence Ground No. 1 is allowed and the penalty is hereby cancelled.

Summary

The appeal before the Appellate Tribunal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2015-16, which pertained to a penalty imposed under section 271AAB of the Income Tax Act, 1961. The appeal was initially considered to be barred by limitation due to a delay of 52 days in filing, but the Tribunal accepted the application for condonation of delay based on the reasons provided by the assessee.The core issue raised in the appeal was the imposition of a penalty of Rs. 5,00,000 under section 271AAB of the Act. The assessee contended that the penalty was not justified as the voluntary disclosure made did not fall within the scope of section 271AAB. The argument was supported by citing the absence of incriminating material and defects in the notice issued. The assessee relied on previous decisions to support the claim that the penalty was not applicable in this case.The Tribunal analyzed the definition of 'undisclosed income' as per the explanation to section 271AAB of the Act, which includes income not recorded before the date of search or not disclosed to the tax authorities. The assessee emphasized that the disclosed income was not represented by any specific assets or entries found during a search. The Tribunal considered the submissions and held that since no incriminating material was found related to the disclosed income, and the disclosure was voluntary and not linked to the search findings, the penalty under section 271AAB was not applicable. The Tribunal also noted that the assessing officer did not establish a connection between the disclosed income and the seized documents. Consequently, the penalty of Rs. 50,00,000 was cancelled, and the appeal was allowed.In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the disclosed income did not meet the criteria of undisclosed income under section 271AAB. The decision was based on the lack of incriminating material and the voluntary nature of the disclosure, leading to the cancellation of the penalty. The appeal was allowed, and the order was pronounced on 20th February 2025.