2012 (2) TMI 261 - AT - Income Tax

Waiver of penalty u/s 271AAA search & seizure conducted disclosure of income in a statement u/s 132(4) underpayment of self assessment taxes shortfall paid within permissible time, upon receiving the notice of demand u/s 156 Held that - On the facts of the present case wherein entire tax and interest has been duly paid well within the time limit for payment of notice of demand u/s 156 and well before the penalty proceedings were concluded, the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings Decided against the Revenue.

Summary

Issues:
Appeal against penalty imposed under section 271AAA of the Income Tax Act, 1961 for the assessment year 2008-09.

Analysis:
1. The Assessing Officer initiated penalty proceedings under section 271AAA due to the assessee's failure to pay full taxes and interest on disclosed income. The assessee argued that the shortfall in self-assessment taxes was paid within the permissible time upon receiving the notice of demand under section 156. The Assessing Officer imposed the penalty as the assessee did not pay the mandatory interest under section 234C, stating that ignorance of the law cannot be a defense. The penalty was computed at 10% of the disclosed amount.

2. The CIT(A) noted that under section 271AAA, if the conditions in sub-section 2 are met, no penalty shall be imposed. The CIT(A) observed that there is no precondition for payment of tax along with interest before filing the return. As the due tax and interest were paid before the penalty proceedings concluded, the CIT(A) deleted the penalty. The Assessing Officer appealed this decision.

3. Section 271AAA provides for penalties in cases of undisclosed income uncovered through search operations after June 1, 2007. The penalty is 10% of the undisclosed income, with conditions for immunity, including payment of tax and interest. The statute does not specify a time limit for such payments. The Tribunal emphasized that the Assessing Officer cannot impose a time limit not set by the statute. The Tribunal cited a case where the Gujarat High Court held that there is no prescribed time for tax payment under similar provisions.

4. The Tribunal highlighted the distinction between section 271AAA and section 271(1)(c) regarding the timing of tax payment. While the latter requires satisfaction during assessment proceedings, the former does not. Therefore, in the present case, where tax and interest were paid before the penalty proceedings concluded, the assessee was eligible for immunity under section 271AAA(2).

5. The Tribunal upheld the CIT(A)'s decision, stating that the entire tax and interest were paid within the required time frame, and the assessee fulfilled the conditions for immunity under section 271AAA(2). Consequently, the appeal against the penalty imposed was dismissed.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the reasoning behind the decision.