2017 (10) TMI 935 - AT - Income Tax

Penalty levied u/. 271 AA - income disclosed u/s. 132(4) - Held that - As rightly noted by the Ld. CIT(A) that as apparent from the assessment order there is no finding of the AO that in the case of the assessee there was anything found in the course of search which was not recorded in the books of account. Just because the assessee has admitted additional income in the course of search it cannot be said that such additional income was undisclosed income within the meaning of undisclosed income provided under explanation to section 271AAA of the Act to impose the penalty. We agree with the Ld. CIT(A) that when the income disclosed u/s. 132(4) of the Act in the course of search itself cannot be treated as undisclosed income within the meaning of undisclosed income as provided in explanation to 271AAA the same cannot be treated as undisclosed income to impose the penalty under that section. We note that ₹ 4 lacs seized has been offered by the assessee in the disclosure petition to be taxed in the hands of M/s. Rahee Infratech Ltd. so, without the AO pointing out that the assessee had undisclosed income in the nature as given in explanation to section 271AAA of the Act, the penalty ought not to have been imposed and that has been rightly deleted by the Ld. CIT(A). - Decided in favour of assessee.

Summary

Issues involved:
Appeals against deletion of penalty u/s. 271AAA of the Income-tax Act, 1961 for AY 2012-13 by Ld. CIT(A)- 21, Kolkata.

Detailed Analysis:

Issue 1: Penalty under section 271AAA of the Act
The appeals filed by the revenue challenged the deletion of penalty u/s. 271AAA of the Act by Ld. CIT(A). The assessee admitted additional income during a search operation, and the AO initiated penalty proceedings for non-payment of tax with interest. The AO contended that the assessee did not substantiate the manner in which the undisclosed income was derived, thus denying immunity from penalty. However, the Ld. CIT(A) deleted the penalty, leading to the revenue's appeal.

Analysis: The Tribunal noted that the assessee had paid the entire tax demanded by the AO before the penalty proceedings concluded, even though the tax was not remitted with interest while filing the return. Citing a precedent, the Tribunal emphasized that the entire tax and interest were paid within the time limit before the penalty proceedings ended, thus entitling the assessee to immunity under section 271AAA(2) of the Act. The disclosure petition filed by the assessee during the search operation was considered, and it was found that the undisclosed income was intimated in general terms, not meeting the criteria of undisclosed income as defined in the Act. The Tribunal concurred with the Ld. CIT(A) that the admitted income during the search could not be treated as undisclosed income for penalty imposition under section 271AAA. As there was no finding of undisclosed income not recorded in the books of account during the search, the penalty was unjustified and rightly deleted by the Ld. CIT(A).

Conclusion: The Tribunal upheld the Ld. CIT(A)'s decision to delete the penalty under section 271AAA, emphasizing that the disclosed income during the search did not qualify as undisclosed income as per the Act's definition. The appeals of the revenue were dismissed, as the facts and legal principles were identical in all cases.