2017 (11) TMI 456 - AT - Income Tax

Penalty under section 271AAA - additional income offered by the assessee during assessment proceedings - Held that - It is not the case of the revenue that the income belonging to the assessee was more than what is surrendered by him. The assessee has modified the surrender made during the course of search on 17.03.2009 and as such it cannot be that it is a case of retraction because the income declared by the assessee which is assessed by the AO. The letter dated 17.03.2009 was filed before the Director of Income Tax (Investigations) I New Delhi who was the in charge of the search and it is also stated in the said letter this surrender is for the whole group and the taxes shall be paid in respective hands/ persons after going through the seized material. It is clear that when this letter was filed the seized material was not with the assessee. The subsequent letters modifying the surrendered amount are based on the income belonging to the assessee on seized material. DR has pointed out that the manner of earning of the surrendered income has not been disclosed by the assessee whereas the assessee by letter dated 21.01.2010 has disclosed the manner of earning the said income by way of trading in commodities and real estate and also stated this fact is substantiated from the seized material. Moreover this factual position is not denied by the AO and this is not the basis for imposing the penalty. In that view of the matter and in view of such facts and circumstances of the case, the CIT(A) is not justified in confirming the action of the AO and accordingly, we direct the AO to delete the penalty imposed under section 271AAA of the Act. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271AAA of the Income-tax Act, 1961.

Detailed Analysis:

1. Grounds of Appeal:
The appellant raised multiple grounds challenging the penalty order passed by the Assessing Officer (AO) under section 271AAA. The appellant argued that the penalty order was illegal, bad in law, and without jurisdiction. The appellant contended that the surrender made during the search should exempt them from the penalty. The appellant also highlighted errors in the CIT(A)'s decision and the excessive nature of the penalty.

2. Facts of the Case:
The case involved a search conducted on the Dawat group, during which a statement under section 132(4) of the Act was recorded. The group surrendered an amount of ?17 crores, with the appellant subsequently declaring additional income. The appellant's total declared income, including the additional income, was ?2,06,18,880. The AO imposed a penalty under section 271AAA, contending that the appellant did not pay tax on the surrendered amount.

3. AO's Position:
The AO argued that the appellant did not pay tax on the surrendered amount and did not disclose the manner of earning the income. The AO maintained that the conditions of section 271AAA(2) were not fulfilled, justifying the penalty imposition.

4. CIT(A)'s Decision:
The CIT(A) dismissed the appeal, stating that the surrender did not qualify as a statement under section 132(4) of the Act. The CIT(A) emphasized the variance between the surrendered amount and the declared income, upholding the AO's penalty decision.

5. Appellant's Defense:
The appellant argued that the surrender was based on seized documents and was not a retraction. They contended that the surrendered income was based on actual earnings, supported by seized material. The appellant cited legal precedent to support their position against the penalty.

6. Judgment:
Upon review, the Tribunal found that the surrender was made during the search and subsequent modifications were based on seized documents. The Tribunal noted that the AO assessed the same income as declared by the appellant. The Tribunal rejected the revenue's argument regarding undisclosed income and upheld the appellant's position that the penalty under section 271AAA should not apply. The Tribunal directed the AO to delete the penalty, allowing the appellant's appeal.

7. Conclusion:
The Tribunal ruled in favor of the appellant, emphasizing that the surrender was genuine and based on seized material. The Tribunal found no grounds for imposing the penalty under section 271AAA, leading to the allowance of the appellant's appeal.

This detailed analysis covers the grounds of appeal, factual background, arguments presented by both parties, the decision of the CIT(A), the appellant's defense, the judgment of the Tribunal, and the final conclusion of the case.