2019 (8) TMI 155 - AT - Income Tax

Penalty u/s 271AAB - proof of undisclosed income of the assessee - HELD THAT - CIT(A) while adjudicating the appeal had failed to deal with the contention of the assessee that no penalty u/s 271AAB of the Act was leviable since there was no undisclosed income of the assessee as defined in the section. CIT(A) we find ,despite specific arguments/contention made by the assessee that no penalty was leviable, has restricted his decision to that the assessee has been unable to make out a case of levy of penalty @ 10%/20% as per clause (a)/(b) of section 271AAB(1) of the Act. Assessee has also drawn our attention to various decisions of the ITAT holding that penalty u/s 271AAB is not automatic and there has to be undisclosed income as defined under the section for the levy of penalty. We therefore consider it fit to restore the issue back to the Ld.CIT(A) to adjudicate the matter afresh in accordance with law ,after considering all the submissions of the assessee. CIT(A) is directed to pass a speaking order, after considering all necessary facts relevant to the issue, i.e. the surrender letter of the assessee ,the statement recorded during search u/s 132(4) making the surrender and any other relevant material/facts, for deciding the issue. Needless to add the assessee be granted proper opportunity of hearing. Appeal of the assessee is therefore allowed for statistical purposes. - Assessee's appeal allowed for statistical purposes.

Summary

Issues:
Appeals against penalty under section 271AAB of the Income Tax Act, 1961.

Analysis:
The appeals were filed by different assessees against orders of the Commissioner of Income Tax (Appeals) related to penalty levied under section 271AAB(1)(c) of the Income Tax Act. The issue in all appeals was identical, concerning penalty imposition based on undisclosed income admitted during search proceedings. The Assessing Officer initiated penalty proceedings after the assessee admitted undisclosed income of ?10,00,000 during search proceedings. The penalty was levied at 30% of the undisclosed income. The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the case fell under section 271AAB(1)(c) of the Act. The assessee argued that no penalty should be levied as there was no undisclosed income as defined in the Act. The assessee also contended that the penalty rate of 30% was unjustified compared to similar cases where a 10% penalty was imposed. The Department argued that the surrender of income constituted undisclosed income, warranting the penalty. The assessee claimed inability to pay taxes due to seized assets, challenging the 30% penalty rate.

The Tribunal found that the Commissioner of Income Tax (Appeals) failed to address the contention that no penalty should be imposed due to the absence of undisclosed income. The Tribunal noted that penalty under section 271AAB is not automatic and requires undisclosed income as defined in the Act. The issue was remanded back to the Commissioner of Income Tax (Appeals) for a fresh decision after considering all relevant facts, including the surrender letter and search statements. The assessee was granted a proper opportunity for a hearing. Consequently, the appeal of the assessee was allowed for statistical purposes, and all three appeals were allowed for the same purpose.