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2015 (7) TMI 490 - AT - Income TaxPenalty levied u/s 271AAA - CIT(A) retained part penalty levy - Held that - Undisclosed income means any income represented by any documents found during the course of search, which are not recorded in the books of accounts of the assessee. In the instant case, the additions of cash expenses and payments of ₹ 71,90,623/- is the result of cash available out of the disclosed cash of ₹ 6.84 crores which was included in the disclosure petition. Further, addition of ₹ 15 lakh on account of alleged cash receipts from Sampoorna Logistics, which was alleged to be reimbursement, it is clear that expenditure recorded in the books of accounts can be held to be undisclosed income of the assessee if the said expenditure is found to be false. It is the Department on whom, onus of proving that expenditure recorded in the books is bogus or false based on documentary evidences found in the course of search. Here in the present case, no documentary evidences establishing the falsity of claim of transportation charges paid to Sampoorna Logistics was found in the course of search. According to us the said expenditure cannot be held to be undisclosed income of the assessee for the purpose of levying penalty u/s. 271AAA of the Act. Penalty cannot be levied merely on the admission of the assessee and there must be some conclusive evidence before the AO that entry made in the seized documents, represents undisclosed income of the assessee. In the instant case, in respect to the amount of ₹ 1,13,65,623/-, there is no evidence which proves that the entries recorded in the documents found during the course of search is over and above the income as declared by the assessee at ₹ 6.84 crores as undisclosed income and accepted by Revenue. In view of the above, we delete the penalty and allow the appeal of the assessee. - Decided in favour of assessee.
Issues Involved:
1. Penalty under Section 271AAA of the Income-tax Act, 1961. 2. Substantiation of manner of earning undisclosed income. 3. Deletion and retention of penalty by CIT(A). Issue-wise Detailed Analysis: 1. Penalty under Section 271AAA of the Income-tax Act, 1961: The case involves cross-appeals by the assessee and the Revenue against the order of CIT(A) which partly confirmed and partly deleted the penalty levied under Section 271AAA. The Assessing Officer (AO) had levied a penalty of Rs. 79,76,560/- on the assessee for the Assessment Year (AY) 2008-09, which was reduced by CIT(A) to Rs. 11,36,560/-. 2. Substantiation of manner of earning undisclosed income: The primary contention revolves around whether the assessee substantiated the manner in which the undisclosed income was earned. The AO argued that the assessee failed to provide corroborative evidence for the disclosed income of Rs. 6.84 crores, which was admitted during the search and seizure operation. The AO maintained that mere admission without substantiation does not satisfy the conditions under Section 271AAA(2)(ii). However, the CIT(A) found that the assessee had provided a detailed working and calculation of the undisclosed income, which was accepted by the AO during the assessment. The CIT(A) thus concluded that the assessee had specified the manner of earning the undisclosed income and deleted the penalty on Rs. 6.84 crores. 3. Deletion and retention of penalty by CIT(A): The CIT(A) deleted the penalty on the disclosed income of Rs. 6.84 crores but confirmed the penalty on the balance undisclosed income of Rs. 1,13,65,623/-. The CIT(A) noted that the latter amount was neither admitted in the statement recorded under Section 132(4) nor included in the return filed by the assessee. This amount was detected by the AO during the assessment proceedings, and thus the conditions specified under Section 271AAA(2) were not satisfied. Tribunal's Observations: - Revenue's Appeal: The Tribunal upheld the CIT(A)'s decision to delete the penalty on Rs. 6.84 crores, agreeing that the assessee had specified and substantiated the manner of earning the undisclosed income through detailed workings and cash flow statements. The Tribunal noted that the AO had accepted these details during the assessment and had not disputed the entries. - Assessee's Appeal: The Tribunal examined the penalty on the undisclosed income of Rs. 1,13,65,623/- and found that the assessee had provided explanations for various entries, which were part of the disclosure petition of Rs. 6.84 crores. The Tribunal also noted that some documents relied upon by the AO were "dumb documents" with no clear indication of the nature or period of transactions. The Tribunal emphasized that penalty cannot be levied merely on admissions without corroborative evidence. Legal Precedents Cited: The Tribunal referred to several cases, including: - Ashok Kumar Sharma v. DCIT: Where the Tribunal held that penalty under Section 271AAA cannot be levied if the undisclosed income is shown under business income and accepted by the Revenue. - CIT v. Sarda Rice and Oil Mills: Highlighting that penalty provisions are not attracted merely based on disclosure without evidentiary value. - CIT v. M. Pachamuthu: Emphasizing that mere addition agreed by the assessee does not justify penalty under Section 271(1)(c). Conclusion: The Tribunal confirmed the deletion of penalty on Rs. 6.84 crores and deleted the penalty on Rs. 1,13,65,623/-, thereby allowing the assessee's appeal and dismissing the Revenue's appeal. The Tribunal concluded that the conditions for levying penalty under Section 271AAA were not satisfied for both amounts as the assessee had specified and substantiated the manner of earning the undisclosed income, and there was no conclusive evidence to support the AO's claim for the additional undisclosed income.
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