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2019 (10) TMI 236 - AT - Income TaxLevy of penalty u/s 271AAA - Addition u/s 69A post search - unexplained money, expenditures and investment - HELD THAT - From the penalty order, we find that the assessee has not filed any Explanation before the A.O. except requesting the A.O. to keep the proceedings in abeyance till the assessee s appeal before the ITAT is disposed of. The AO, however, concluded the proceedings by observing that the assessee has not submitted any explanation to the show cause notice dated 14.3.2012 issued u/s 271AAA r.w.s. 274 . The assessee has not filed any explanation even before the CIT(A), except for the cash book for the period 1/4/2007 to 31/3/2008 submitting that the opening balance of ₹ 13,37,026.75 as the source for the cash found. We find that the CIT(A) has clearly brought out that the sources for cash found and the investment are not explained by the assessee. Therefore, assessee s argument that the assessee s explanation has not been found to be false and, therefore, penalty is not sustainable is not acceptable. We also find that the assessee has not fulfilled the conditions under Sub-Section (2) of Sec.271AAA of the Act to be out of the ambit of sub-section(1) of sec.271AAA of the Act. Therefore, penalty u/s 271AAA of the Act can be levied as the undisclosed income found during the course of search has not been substantiated by the assessee and it is also not proved that taxes have been paid thereon. Addition has also been confirmed by ITAT. Therefore, we cannot agree with the contentions of the Ld. Counsel for the assessee that the penalty u/s 271AAA of the Act is not attracted because the explanation of the assessee has not been proved to be wrong. We reject the assessee s grounds and the penalty u/s 271AAA is upheld.
Issues Involved:
1. Levy of penalty under Section 271AAA of the Income Tax Act, 1961. 2. Explanation and substantiation of unexplained investments and cash by the assessee. 3. Applicability of provisions under Sections 274 and 275 regarding the procedure for imposing penalties. 4. Conditions for immunity from penalty under Section 271AAA(2). Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 271AAA of the Income Tax Act, 1961: The primary issue in this appeal is the levy of penalty under Section 271AAA, which was imposed by the Assessing Officer (A.O.) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was levied at 10% of the undisclosed income assessed, amounting to ?61,500. The A.O. initiated the penalty proceedings following the confirmation of additions to the assessee's income for unexplained investments and cash found during a search. 2. Explanation and Substantiation of Unexplained Investments and Cash: The assessee failed to explain the sources of cash amounting to ?5,00,000 and the investment of ?1,15,000 in the Serilingampalli property. Despite being given opportunities, the assessee could not provide satisfactory evidence to substantiate these amounts. The ITAT had previously set aside the matter to the A.O. for fresh consideration, but the assessee's inability to provide evidence led to the confirmation of these additions. 3. Applicability of Provisions under Sections 274 and 275: The judgment emphasizes that the levy of penalty under Section 271AAA is not automatic and is subject to the provisions of Sections 274 and 275, which require that the assessee be given a reasonable opportunity of being heard. The A.O. must consider the assessee's explanation before imposing the penalty. In this case, the assessee did not file any substantial explanation before the A.O. or the CIT(A), leading to the conclusion that the penalty proceedings were justified. 4. Conditions for Immunity from Penalty under Section 271AAA(2): Section 271AAA(2) provides conditions under which an assessee can be exempted from penalty, including admitting the undisclosed income during the search, specifying and substantiating the manner in which the income was derived, and paying the tax along with interest. The assessee in this case did not fulfill these conditions. Specifically, the assessee did not substantiate the manner of deriving the undisclosed income and failed to prove that taxes were paid on the undisclosed income. Therefore, the penalty under Section 271AAA was deemed applicable. Conclusion: The ITAT upheld the penalty under Section 271AAA, rejecting the assessee's appeal. The tribunal noted that the assessee's failure to provide a satisfactory explanation and to meet the conditions for immunity under Section 271AAA(2) justified the imposition of the penalty. The decision aligns with similar judgments, such as the one in the case of ACIT vs. Shri Shailesh Gopal Mhaske, confirming that the penalty provisions were correctly applied. Disposition: The appeal filed by the assessee was dismissed, and the penalty under Section 271AAA was upheld. The judgment was pronounced in the open court on 09th August 2019.
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