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2019 (10) TMI 1173 - AT - Income TaxPenalty u/s 271AAB - cash accumulated in saving account - cash found from the locker of wife of the assessee - HELD THAT - Cash was found from the locker of the wife of the assessee and this fact is also manifest from the statement of the assessee recorded U/s 132(4) of the Act. In reply to question No. 6 the assessee has stated that the cash found from the locker of the wife of the assessee is admitted his undisclosed income and surrendered for tax. The assessee has explained during the penalty proceedings that this cash of 8, 53, 500/- is accumulated savings for past years and therefore the same is not an undisclosed income of the assessee. The very fact of source of cash from the locker of the wife demonstrate that the same belongs to the wife of the assessee and even as per the provisions of Section 132(4A) presumption can be raised regarding any money bullion jewellery or other valuable articles or things is found in the possession or control of any person in the course of search the same belongs to such person. Cash was found from the locker of the wife of the assessee which means it was found from the possession and control of the wife and therefore cannot be presumed to be belonging to the assessee. Accordingly without considering the cash being an undisclosed income of the assessee as per definition provided in the explanation to Section 271AAB the levy of penalty in respect of such surrender made by the assessee is not sustainable. Hence the same is deleted. Penalty is not automatic as a result of surrender made by the assessee but the A.O. has to first decide whether the surrender made by the assessee is falling in the definition of undisclosed income as provided in the explanation to Section 271AAB(1) - When the assessee has furnished explanation that the cash found from the locker of wife of the assessee is representing the past savings of the wife then in absence of giving a finding on the part of the A.O. that the cash actually belongs to the assessee and not to the wife the levy of penalty U/s 271AAB of the Act is not sustainable and the same is deleted. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of the penalty order under Section 271AAB due to unspecified limbs in the notice. 2. Validity of the penalty order due to unspecified default in the notice under Section 274 read with Section 271. 3. Confirmation of the penalty of ?1,20,710 under Section 271AAB. 4. Whether the additional income declared by the assessee can be treated as undisclosed income. Detailed Analysis: 1. Validity of the Penalty Order under Section 271AAB Due to Unspecified Limbs in the Notice: The assessee argued that the penalty order under Section 271AAB was invalid as the Assessing Officer (AO) did not specify which clause of Section 271AAB(1) (a, b, or c) was being invoked. The Tribunal noted that the show cause notice was defective because it did not mention the correct section for the levy of penalty and failed to specify the default committed by the assessee. The notice included multiple defaults in a pre-typed format, making it unclear which specific default applied to the assessee. Consequently, the initiation of penalty proceedings was deemed to suffer from serious defects, rendering them incurable. 2. Validity of the Penalty Order Due to Unspecified Default in the Notice under Section 274 Read with Section 271: The Tribunal observed that the show cause notice issued under Section 274 read with Section 271 did not specify the particular default for which the penalty was being levied. The notice failed to clarify whether the penalty was for concealment of income, furnishing inaccurate particulars, or any other default. This lack of specificity violated the principles of natural justice, as the assessee was not given a fair opportunity to respond to the specific charge. The Tribunal referenced the case of Manjunatha Cotton & Ginning Factory, which emphasized the necessity of specifying the grounds for penalty in the notice. 3. Confirmation of the Penalty of ?1,20,710 under Section 271AAB: The assessee contended that the additional income declared in the return could not be treated as undisclosed income under Section 271AAB. It was argued that the cash found during the search represented the wife's small savings over the years and was surrendered under pressure from authorities. The Tribunal noted that the AO did not provide a clear finding that the cash belonged to the assessee and not the wife. The explanation provided by the assessee was not adequately addressed by the AO. Consequently, the Tribunal held that the penalty was not sustainable and deleted it. 4. Whether the Additional Income Declared by the Assessee Can Be Treated as Undisclosed Income: The Tribunal emphasized that the penalty under Section 271AAB is not automatic upon the surrender of income. The AO must first determine whether the surrendered income falls within the definition of undisclosed income as per the explanation to Section 271AAB(1). In this case, the assessee explained that the cash found in the wife's locker represented past savings. Without a clear finding that the cash belonged to the assessee, the Tribunal concluded that the penalty was not justified and should be deleted. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the penalty order under Section 271AAB due to the defective notice and lack of specific findings by the AO. The penalty of ?1,20,710 was deleted, and the Tribunal emphasized the need for clear and specific notices in penalty proceedings to uphold the principles of natural justice.
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