9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 1311 - AT - Income TaxPenalty order passed under section 271AAB - undisclosed income - non maintaining the books of account - Held that - When the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. We hold that the penalty levied under section 271AAB is not sustainable and the same is deleted. See case of Shri Ravi Mathur 2018 (6) TMI 1128 - ITAT JAIPUR - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty order under section 271AAB of the Income Tax Act, 1961. 2. Application of mind by the Assessing Officer (AO) while issuing show cause notice. 3. Definition and substantiation of "undisclosed income". 4. Discretionary vs. mandatory nature of penalty under section 271AAB. Issue-wise Detailed Analysis: 1. Validity of Penalty Order under Section 271AAB: The appeal concerns the validity of the penalty order passed under section 271AAB for the assessment year 2015-16. The assessee argued that the penalty order was void ab-initio and deserved to be quashed. The Tribunal noted that the penalty was levied based on a search conducted on 30th October 2014, where the assessee disclosed and surrendered an income of ?7,01,00,000. The AO imposed a penalty of ?70,10,000 under section 271AAB, which was confirmed by the CIT (A) without considering the assessee's submissions. The Tribunal found that the penalty order was not sustainable due to the lack of specific grounds and clauses mentioned in the show cause notice, rendering the notice invalid. 2. Application of Mind by the Assessing Officer: The Tribunal observed that the AO issued show cause notices in a routine manner without specifying under which clause of section 271AAB the penalty was to be imposed. This lack of specificity indicated a lack of application of mind by the AO. The Tribunal referenced the decision of the Hon’ble Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory, which held that a show cause notice must specify the grounds for penalty to allow the assessee to mount a proper defense. The Tribunal concluded that the AO's failure to specify the grounds and clauses in the show cause notice rendered the penalty proceedings unlawful. 3. Definition and Substantiation of "Undisclosed Income": The Tribunal emphasized that for a penalty under section 271AAB to be valid, the income must qualify as "undisclosed income" as defined in the explanation to the section. The assessee argued that no undisclosed income was found during the search, and the income disclosed was under pressure. The Tribunal noted that the term "undisclosed income" includes income not recorded in the books of accounts or other documents maintained in the normal course. In this case, the transactions were recorded in a diary, which was considered as maintained in the normal course, thereby not qualifying as undisclosed income. The Tribunal referenced similar cases, including DCIT vs. Madan Lal Beswal, where it was held that income recorded in other documents maintained in the normal course does not constitute undisclosed income. 4. Discretionary vs. Mandatory Nature of Penalty: The Tribunal analyzed whether the levy of penalty under section 271AAB is mandatory or discretionary. It concluded that the use of the word "may" in the section indicates that the AO has discretion in imposing the penalty. The Tribunal referenced the decision of the Visakhapatnam Bench in ACIT vs. Marvel Associates, which held that the penalty under section 271AAB is not mandatory but discretionary, requiring the AO to consider the facts and circumstances of each case. The Tribunal further noted that the AO must provide a proper opportunity of hearing to the assessee, and the penalty is not automatic but subject to the AO's judicious decision. Conclusion: The Tribunal allowed the appeal, canceling the penalty levied under section 271AAB, as the AO failed to specify the grounds for penalty, did not properly apply the definition of undisclosed income, and did not exercise discretion judiciously. The penalty order was found to be unsustainable in law.
|
