2012 (12) TMI 629 - AT - Income Tax

Penalty u/s 271AAA - Undisclosed Income Enhancement in value of House Constructed and Trucks purchased - Held that - No definition could be given to the specified manner insofar as the very statement on oath u/s.132(4) specifies the manner on which the assessee is prepared to pay tax thereon. As assessee has made disclosure for the respective amounts but failed to specify the manner in which such income had been derived a there is no prescribed method to indicate the manner in which income was generated when the definition of undisclosed income has been defined in the Act itself when no income of the specified previous year represented either wholly or partly which onus lay upon the assessee stood discharged - As decided in DCIT Versus Pioneer Marbles & Interiors Pvt Ltd 2012 (2) TMI 261 - ITAT, KOLKATA 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 - Levy of penalty u/s.271AAA in the instant cases are not justified - penalty so levied cancelled - in favour of assessee.

Summary

Issues Involved:
Penalty levied u/s.271AAA of the Income-tax Act,1961 for AYs 2007-08 and 2008-09.

Detailed Analysis:

1. Common Issue of Penalty Levied u/s.271AAA:
The appeals before the Appellate Tribunal ITAT CUTTACK involved the common issue of penalty levied u/s.271AAA of the Income-tax Act,1961 for the Assessment Years 2007-08 and 2008-09. The assessees, including a director of a company, were subjected to search and seizure operations, leading to disclosures of additional income. The Assessing Officer initiated penalty proceedings under Section 271AAA for not specifying the manner in which the surrendered income was derived. The first appellate authority partly reduced the penalties imposed, considering the conditions under Section 271AAA(2). The assessees contended that they had disclosed the income, paid taxes, and the Assessing Officer had accepted the returns. They argued that the manner of deriving income was evident from the assets acquired and the returns filed. The Assessing Officer's insistence on defining the manner was challenged, citing precedents where penalties were canceled under similar circumstances.

2. Arguments and Counter-Arguments:
The assessees argued that the Assessing Officer's acceptance of the surrendered income and the returns filed should suffice, and the penalty was unjustified without a prescribed manner of deriving income. They emphasized that the penalty provision should not be automatic and punitive. The Department contended that the conditions under Section 271AAA(2) must be satisfied together, and the penalty was warranted for non-specification of the income's manner. The Appellate Tribunal analyzed the legal provisions and precedents cited by both parties.

3. Tribunal's Decision and Reasoning:
After considering the facts and arguments presented, the Tribunal held that the "specified manner" of deriving income need not be defined separately as it was implicit in the disclosures made during the search operations and in the returns filed. The Tribunal referred to case laws supporting the view that penalty under Section 271AAA is not automatic if all conditions are not met, especially when tax and interest have been paid. The Tribunal found that the penalty was imposed after tax recovery, indicating compliance with tax obligations. It concluded that the penalty levied under Section 271AAA was not justified in the present cases, and therefore, the penalties were canceled for the respective assessment years.

4. Outcome:
As a result of the Tribunal's decision, all the appeals filed by the assessees were allowed, and the penalties imposed under Section 271AAA for the relevant assessment years were canceled. The Tribunal's detailed analysis and interpretation of the legal provisions and precedents led to the favorable outcome for the assessees in this case.

This comprehensive summary provides an in-depth understanding of the legal judgment, including the issues involved, arguments presented by both parties, the Tribunal's decision, and the final outcome of the case.