9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (4) TMI 867 - AT - Income TaxPenalty u/s 271AAB - discretionary and not mandatory - in statment u/s 132(4) disclosed total undisclosed income of ₹ 10,01,00,000/- on account of advance for purchase of land and also incorporated in return - except the statement u/s 132(4) there is no undisclosed income in the case of the assessee - in SCN no mention under which clause of section 271AAB the assessee is liable for penalty - HELD THAT - This Tribunal has taken a consistent view that the levy of penalty U/s 271AAB of the Act is not mandatory but the AO has discretion to take a decision after arriving to the conclusion that the income disclosed by the assessee in the statement recorded U/s 132(4) is an undisclosed income in terms of Section 271AAB(1) r.w. explanation defining the undisclosed income. The decision relied by the ld. CIT-DR in case of Principal Commissioner of Income Tax vs. Sandeep Chandak 2017 (12) TMI 70 - ALLAHABAD HIGH COURT cannot be applied on the issue before us. In the case in hand though the assessee was required to maintain regular books of accounts as per the provisions of section 44AA of the IT Act, however, the AO in the assessment proceedings rejected the books of accounts of the assessee under section 145(3) and assessed the income from the activity of civil contract on estimated basis by making a lump sum addition of ₹ 4,50,000/-. The diary found during the course of search and seizure at the business premises of the assessee contains the entries of advances given for purchase of land. However, until and unless the said transaction is carried out as part of regular business activity, the same is not required to be recorded in the regular books of account and, therefore, the said amount of advance given for purchase of land can be recorded in the capital account of the assessee. Thus the transactions found recorded in the diary are to be recorded in the capital account of the assessee as well as in the balance sheet prepared as on 31st March, 2014 and not on the date of search as on 4th/5th September, 2013. The nature of transactions if not carried out or entered into as part of the business activity are not required to be recorded in the regular books of accounts maintained for the purpose of business activity of the assessee. Following the earlier decisions of the Coordinate Bench of the Tribunal in the case of Ravi Mathur vs. DCIT 2018 (6) TMI 1128 - ITAT JAIPUR as well as Shri Raja Ram Maheshwari vs. DCIT 2019 (1) TMI 1546 - ITAT JAIPUR , we delete the penalty levied under section 271AAB of the Act. Since the issue of levy of penalty U/s 271AAB of the Act has been decided on merits in favour of the assessee and against the Revenue therefore, the issue of validity of initiation of the penalty proceeding due to defective show cause notice become academic in nature and we do not propose to adjudicate the same.
Issues Involved:
1. Validity of the penalty order under section 271AAB of the Income Tax Act, 1961. 2. Confirmation of penalty imposition by the Assessing Officer. 3. Procedural defects in the show cause notice issued by the Assessing Officer. 4. Discretionary vs. mandatory nature of penalty under section 271AAB. 5. Definition and scope of 'undisclosed income' under section 271AAB. Detailed Analysis: 1. Validity of the Penalty Order Under Section 271AAB: The appellant contended that the penalty order under section 271AAB was void ab initio and should be quashed. The Tribunal noted that the Assessing Officer (AO) issued show cause notices in a routine manner without specifying under which clause of section 271AAB the penalty was being imposed. This lack of specificity indicated a lack of application of mind, rendering the show cause notice unlawful. The Tribunal referenced the Karnataka High Court decision in CIT vs. Manjunatha Cotton & Ginning Factory, which emphasized the need for clarity in show cause notices. 2. Confirmation of Penalty Imposition by the Assessing Officer: The AO imposed a penalty of ?1,00,10,000 under section 271AAB on the surrendered income of ?10,01,00,000. The appellant argued that the penalty was imposed without a proper basis, as the AO did not provide a specific finding that the income in question was 'undisclosed income' as defined under section 271AAB. The Tribunal noted that the AO must examine the facts and circumstances and determine if the income disclosed falls within the definition of 'undisclosed income.' 3. Procedural Defects in the Show Cause Notice: The appellant argued that the show cause notices issued on 29th December 2016 and 16th August 2016 were defective as they did not specify the grounds or clauses under which the penalty was to be levied. The Tribunal agreed, stating that the AO must specify the undisclosed income and the grounds for penalty in the show cause notice to allow the assessee to prepare a defense. The Tribunal relied on the decision of the Chennai Bench of the Tribunal in DCIT vs. Shri R. Elangovan, which held that a show cause notice must specify the grounds for penalty. 4. Discretionary vs. Mandatory Nature of Penalty Under Section 271AAB: The appellant argued that the penalty under section 271AAB is discretionary, not mandatory. The Tribunal agreed, noting that the use of the word 'may' in section 271AAB indicates discretion. The Tribunal referenced the decision of the Visakhapatnam Bench in ACIT vs. M/s. Marvel Associates, which held that the levy of penalty under section 271AAB is not automatic but discretionary based on the facts and circumstances of each case. The Tribunal emphasized that the AO must provide an opportunity for the assessee to explain and must consider the explanation before imposing the penalty. 5. Definition and Scope of 'Undisclosed Income' Under Section 271AAB: The appellant contended that the income recorded in the seized diary was not 'undisclosed income' as defined under section 271AAB. The Tribunal noted that the definition of 'undisclosed income' includes income not recorded in the books of account or other documents maintained in the normal course. The Tribunal found that the transactions recorded in the diary were not part of the regular business activity and were to be recorded in the capital account. Therefore, the income recorded in the diary did not fall within the definition of 'undisclosed income.' Conclusion: The Tribunal concluded that the penalty levied under section 271AAB was not sustainable. The AO had not specified the grounds for penalty in the show cause notice, and the income recorded in the diary did not constitute 'undisclosed income.' The Tribunal emphasized that the levy of penalty under section 271AAB is discretionary and not mandatory. The appeal of the assessee was allowed, and the penalty was deleted.
|
