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2019 (3) TMI 810 - AT - Income TaxLevy of penalty u/s 271AAB OR u/s.271 - penalty proceedings initiated u/s 271AAB - no notice issued for initiating penalty proceedings u/s 271(1)(c) - penalty imposed u/s 271(1)(c) - addition u/s 68 - details of nine share applicants giving share application money to the assessee could not be verified and also showed his inability to prove the creditworthiness and genuineness of the amount received - HELD THAT - penalty proceedings ought to have been intimated u/s 271(1)(c) of the Act but were wrongly initiated u/s 271AAB of the Act for Assessment Year 2012-13. we are of the view that as the basic requirements for invoking Section 271AAB of the Act is not fulfilled, we have no option left except to allow the legal grounds raised by the assessee and quash the penalty proceedings initiated u/s 271AAB of the Act and delete the penalty levied by the Ld. A.O. - Decided in favour of assessee.
Issues Involved:
1. Legality of penalty proceedings initiated under Section 271AAB of the Income Tax Act, 1961. 2. Appropriateness of the penalty percentage levied under Section 271AAB. 3. Whether the provisions of Section 271(1)(c) should have been invoked instead of Section 271AAB. Issue-wise Detailed Analysis: 1. Legality of Penalty Proceedings Initiated under Section 271AAB: The primary issue was whether the penalty proceedings under Section 271AAB were correctly initiated for the Assessment Year (AY) 2012-13. The appellant argued that the necessary conditions for invoking Section 271AAB were not met. Specifically, the search was conducted on 21.09.2012, and the appellant had already filed its return for AY 2012-13 on 13.09.2012. As per Explanation (b) of Section 271AAB, the "specified previous year" should either be a year where the due date for filing the return had not expired before the date of search and the return had not been filed, or the year in which the search was conducted. Since the return for AY 2012-13 was filed before the search, the year did not qualify as a "specified previous year" under Section 271AAB. Therefore, the Tribunal concluded that the penalty proceedings under Section 271AAB for AY 2012-13 were not legally sustainable. 2. Appropriateness of the Penalty Percentage Levied under Section 271AAB: The appellant contested the 30% penalty levied on the undisclosed income of ?2,89,50,000. The appellant argued that the penalty should have been 10% as per Section 271AAB(1)(a) since the undisclosed income was admitted and offered to tax during the search, and due taxes were paid. However, since the Tribunal found the initiation of penalty proceedings under Section 271AAB itself invalid, this issue became academic and was not further deliberated upon. 3. Whether the Provisions of Section 271(1)(c) Should Have Been Invoked: The Tribunal observed that the Assessing Officer (AO) might have better served the Revenue by invoking Section 271(1)(c) instead of Section 271AAB. Section 271(1)(c), particularly Explanation 5A, applies to cases where undisclosed income is found during a search, and the income was not declared in the original return filed before the search. The appellant had filed the original return on 13.09.2012, and the undisclosed income was not included in this return but was surrendered during the search on 21.09.2012. Therefore, had the AO invoked Section 271(1)(c), the penalty would likely have been upheld. However, since the AO did not issue a notice under Section 271(1)(c), the Tribunal could not uphold the penalty under this section. Conclusion: The Tribunal quashed the penalty proceedings initiated under Section 271AAB for AY 2012-13 and deleted the penalty of ?86,85,000. The Tribunal highlighted that the AO should have invoked Section 271(1)(c) instead, which would have been more appropriate under the circumstances. The appeal of the assessee was allowed, and the penalty proceedings under Section 271AAB were deemed invalid and bad in law.
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