2018 (5) TMI 1103 - AT - Income Tax

Penalty u/s.271(1)(c) - non specification of charge - Held that - The manner of initiating and levying of penalty without making reference to the specific limb of clause (c) is unsustained. AO is under obligation to specify the correct limb at the time of initiation as well as at the time of levy of penalty. Therefore, the penalty levied by the AO and confirmed by the CIT(A) is unsustainable on technical grounds. - Decided in favour of assessee Penalty u/s 271AAA - undisclosed investment in jewellery was found during the course of search which was not found recorded in the regular books of accounts - Held that - Although the appellant had disclosed undisclosed income in the return filed after the search he did not disclose the manner of deriving the undisclosed income hence does not qualify for any immunity in terms of section 271AAA(2). The AO was fully justified in levying the penalty under section 271AAA - We agree with the contention of the appellant that undisclosed income would be only the value of undisclosed investment of ₹ 6,10,000/- found during the search and not ₹ 6,25,000/- offered by the appellant. Accordingly, amount of penalty u/s.271AAA being 10% of undisclosed income of ₹ 6,10,000/- would be ₹ 61,000/-. Penalty levied u/s.271AAA to the extent of ₹ 61,000/- is upheld on account of concealing the particulars of income. Ground raised by the appellant is hereby partly allowed.

Summary

Issues involved:
1. Appeal against penalty u/s.271(1)(c) for A.Y. 2006-07.
2. Appeal against penalty u/s.271AAA for A.Y. 2011-12.

Issue 1: Appeal against penalty u/s.271(1)(c) for A.Y. 2006-07:
The assessee filed an appeal against the penalty levied u/s.271(1)(c) for A.Y. 2006-07. The AO initiated penalty proceedings due to discrepancies in cash balances and undisclosed income found during a search. The CIT(A) upheld the penalty, citing the judgment of the Gujarat High Court. However, the ITAT Pune found the penalty order lacking as the AO did not specify the particular limb of clause (c) under which the penalty was imposed. The ITAT held that the penalty was unsustainable on technical grounds, citing legal precedents. Consequently, the ITAT allowed the appeal, canceling the penalty.

Issue 2: Appeal against penalty u/s.271AAA for A.Y. 2011-12:
The appeal was made against the penalty imposed u/s.271AAA for A.Y. 2011-12 due to excess jewellery found during a search. The AO held that the conditions of section 271AAA were not met, leading to the penalty. The CIT(A) partially ruled in favor of the assessee but upheld a penalty of &8377; 61,000. During the ITAT proceedings, the assessee argued against the CIT(A)'s decision. The ITAT reviewed the case and upheld the CIT(A)'s order, stating that the penalty was justified as the undisclosed income was not fully explained. The ITAT found the CIT(A)'s decision fair and reasonable, leading to the dismissal of the appeal.

In summary, the ITAT Pune allowed the appeal against the penalty u/s.271(1)(c) for A.Y. 2006-07, citing technical deficiencies in the penalty order. However, the appeal against the penalty u/s.271AAA for A.Y. 2011-12 was dismissed as the undisclosed income related to excess jewellery was not adequately explained. The ITAT upheld the CIT(A)'s decision in this regard.