2014 (8) TMI 759 - AT - Income Tax

Penalty u/s 271AAA Proper evidences to substantiate the undisclosed income not furnished by assessee Held that - As per CIT(A) s observation, the AO has accepted the explanation as no further corroborative adverse material was in the possession of the AO - The books of accounts stands vetted - the AO was required to form an opinion and further it must be reflected in substance for initiation of penalty proceedings - It is also not a case where specific questions were raised on the issue which could not be satisfactorily explained by the assessee - he proceeded to initiate penalty u/s 271AAA - The AO after accepting the contentions/surrender of the assessee has therefore erred in initiating the penalty and consequently levying the penalty u/s 271AAA - The overt action of the AO clearly revealed that the manner of having earned the income was accepted - Assessee has honoured the surrender made u/s 132(4) and paid the taxes thereon being part of the total surrender, which is not in dispute - The position is alike in respect of the surrender on account of furniture and fixtures and on account of misc. income - CIT(A) has rightly directed the AO to delete the penalty levied of ₹ 50,50,000 thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues:
- Penalty under section 271AAA of the I.T. Act, 1961 for undisclosed income earned.
- Adjudication of the appeals by the Revenue concerning penalty deletion.

Analysis:
1. The appeals by the Revenue were related to penalty orders passed by the Ld. CIT(A) for the assessment year 2009-10. The issues were common in both appeals, differing only in the amount. The Tribunal decided to address the matter with reference to Appeal No. 3856/Del/2013 for convenience.

2. The grounds raised in the appeals questioned the deletion of penalties amounting to Rs. 50,50,500 and Rs. 69,00,000 respectively under section 271AAA of the I.T. Act, 1961. The contention was that the assessee failed to provide evidence to substantiate the manner in which undisclosed income was earned.

3. The brief facts revealed that the assessee was searched, and the return of income declared was accepted under section 158B(1)(b). Penalties were imposed, leading to appeals before the Ld. CIT(A), who subsequently deleted the penalties after considering submissions and relevant documents.

4. During the hearing, the Revenue argued based on the penalty orders, while the Counsel for the assessee presented arguments supported by various judgments. The Tribunal noted that the case was akin to precedents where penalties were deleted under similar circumstances.

5. The Ld. CIT(A) extensively reviewed the statements recorded, assessment orders, and explanations provided by the assessee. The AO had accepted the explanations offered by the assessee regarding surrendered amounts, as evident from the assessment order.

6. However, discrepancies were found in the AO's acceptance of explanations and subsequent initiation of penalty proceedings under section 271AAA. The Tribunal observed that if the AO accepted the manner of earning income, penalizing the assessee for the same was unjustified.

7. Citing relevant judgments and precedents, the Tribunal upheld the Ld. CIT(A)'s decision to delete the penalties, emphasizing that the AO erred in initiating and levying penalties when the explanations provided by the assessee were accepted, and no adverse material was found to rebut the claims.

8. Ultimately, the Tribunal dismissed the appeals by the Revenue, affirming the deletion of penalties by the Ld. CIT(A) based on the lack of substantial evidence to support penalizing the assessee under section 271AAA.

This detailed analysis showcases the Tribunal's thorough examination of the issues involved and the reasoning behind upholding the decision to delete the penalties imposed on the assessee.