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2018 (5) TMI 1602 - AT - Income TaxPenalty u/s. 271AAB - income from commodity profit has been found during search u/s. 132 of the Act which is not reflected in the regular books of account - assessee s transactions (in this case the speculative transaction) has been found to be recorded in the other documents which is (retrieved from the assessee s accountant s drawer) - Held that - Since the assessee is not engaged in business or profession he does not require to maintain the books of account as per sec. 44AA or sec. 44AA(2) of the Act As relying on DCIT VERSUS MANISH AGARWALA 2018 (2) TMI 972 - ITAT KOLKATA we note that since the income under question was in fact entered in the other documents maintained in the normal course relating to the AY 2013-14 which document was retrieved during search hence the amount offered by the assessee does not fall in the ken of undisclosed income defined in Sec. 271AAB of the Act - Decided in favour of assessee.
Issues Involved:
1. Deletion of penalty imposed under Section 271AAB of the Income-tax Act, 1961. Detailed Analysis: Issue 1: Deletion of Penalty Imposed Under Section 271AAB of the Income-tax Act, 1961 Facts and Background: A search and seizure operation was conducted on the Nezone Group on 01.08.2012. The assessee, a key person in the group, admitted to an undisclosed income of ?5,55,00,000 for AY 2013-14 in the form of commodity profit. The assessee filed a return of income declaring ?5,71,54,600. The Assessing Officer (AO) imposed a penalty under Section 271AAB of the Act, asserting that the undisclosed income was discovered during the search and was not recorded in the books of account. CIT(A) Decision: The CIT(A) deleted the penalty, noting that the AO did not provide evidence of the assessee's intention to conceal income. The CIT(A) observed that the failure to record income in the regular books was a bona fide mistake by the accountant, and there was ample time to correct this before the end of the financial year. The CIT(A) concluded that the imposition of penalty was not justified as it did not prove a guilty mind or intention to conceal income. Tribunal’s Analysis: The Tribunal noted that similar penalties imposed on other individuals in the Nezone Group were deleted by the CIT(A) and upheld by the Tribunal in previous cases. The Tribunal agreed with the CIT(A) that the penalty under Section 271AAB is not mandatory but discretionary, as indicated by the use of the word "may" instead of "shall" in the statute. The Tribunal referenced the ITAT Lucknow decision in Sandeep Chandak & Ors. Vs. CIT, which held that penalty provisions should be strictly construed and are not mandatory. Legal Interpretation: The Tribunal emphasized that the penalty provisions under Section 271AAB are discretionary. The assessee's income from commodity trading was declared under "Income from Other Sources," which was accepted by the AO without contesting its classification. The Tribunal clarified that the AO's observation during the assessment that the income was from "speculative business" was erroneous, as the income was declared and assessed under "Income from Other Sources." Conclusion: The Tribunal upheld the CIT(A)'s decision, concluding that the income from commodity trading, recorded in other documents and declared in the return, did not constitute "undisclosed income" as defined under Section 271AAB. Consequently, the penalty imposed by the AO was not justified. Outcome: Both appeals by the revenue were dismissed, and the deletion of the penalty under Section 271AAB by the CIT(A) was confirmed. The Tribunal's order was pronounced in the open court on 25.05.2018.
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