9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (11) TMI 637 - AT - Income TaxPenalty u/s 271AAB - whether it is mandatory or discretionary - income surrender on account of advance for land - HELD THAT - Levy of penalty U/s 271AAB is not mandatory but the AO has to take a decision on the basis of relevant facts of the case and after considering the reply of the assessee whether the surrender made by the assessee falls in the definition of undisclosed income as defined in the explanation to Section 271AAB(1) of the Act. Accordingly, following the earlier decision of this Tribunal we hold that the penalty U/s 271AAB of the Act is discretionary and not mandatory. It is not an automatic as a consequence of surrender of income by the assessee but the conditions precedent as provided U/s 271AAB are to be satisfied for levy of the penalty. Therefore, the finding of the ld. CIT(A) that the penalty is mandatory in nature is not sustainable and the same is set aside Without going into the controversy whether these entries are artificial or actual payment made by the assessee when there was no asset actually acquired by the assessee or possessed by the assessee then the mere notings of payment being advanced for land cannot be held as undisclosed income of the assessee. The Revenue has not made any efforts to ascertain the correct and proper particulars of the land and the person to whom the alleged payment was made by the assessee. Nothing has been brought on record to show that the assessee has finally acquired these lands by executing some documents or title deeds. When there is no acquisition of land then in the absence of the corresponding asset acquired by the assessee the mere noting of the advance which is out flow of the funds cannot be held as undisclosed income. In SHRI RAJA RAM MAHESHWARI VERSUS THE DCIT, CENTRAL CIRCLE-3, JAIPUR. 2019 (1) TMI 1546 - ITAT JAIPUR Tribunal has consistently held that mere entries of advance for land cannot be treated as undisclosed income. Accordingly, following the decision of the Coordinate Bench and maintaining the rule of consistency we hold that the penalty U/s 271AAB is not sustainable in respect of the income surrender on account of advance for land because of alleged transactions do not fall in the ambit of undisclosed income as defined in explanation to Section 271AAB(1) of the Act. Accordingly the penalty levied U/s 271AAB is in the case of the assessee is deleted. - Appeal filed by the assessee is allowed.
Issues Involved:
1. Validity of penalty order under section 271AAB without specifying the limb of the offence. 2. Justification for the penalty of ?60,28,500/- under section 271AAB. 3. Nature of penalty under section 271AAB: mandatory or discretionary. Issue-wise Detailed Analysis: 1. Validity of Penalty Order under Section 271AAB: The primary issue raised by the assessee was that the CIT(A) erred in confirming the penalty order under section 271AAB without recording satisfaction regarding the specific limb of the offence committed by the assessee. The Tribunal noted that the penalty under section 271AAB is not automatic but requires the Assessing Officer (AO) to issue a show cause notice and provide an opportunity for the assessee to be heard. The AO must determine whether the conditions for levying the penalty are satisfied and whether the income disclosed falls within the definition of "undisclosed income" as per the explanation to section 271AAB. The Tribunal emphasized that the AO must take a discretionary decision based on the facts and circumstances of each case, rather than treating the penalty as mandatory. 2. Justification for the Penalty of ?60,28,500/-: The assessee argued that the penalty of ?60,28,500/- was unjustified as the income surrendered during the search did not fall within the definition of "undisclosed income" under section 271AAB. The Tribunal observed that the notings in the diary found during the search represented advances given for land, which is an outflow of funds, not an inflow. The Tribunal held that mere entries of advances for land cannot be treated as undisclosed income unless there is evidence of actual acquisition of land or corresponding assets. The Tribunal also noted that the Revenue did not verify the contents of the loose sheet with the books of accounts or find any undisclosed assets. Therefore, the penalty was deemed unsustainable as the alleged transactions did not fall within the ambit of undisclosed income as defined in section 271AAB. 3. Nature of Penalty under Section 271AAB: The Tribunal discussed whether the penalty under section 271AAB is mandatory or discretionary. It was concluded that the penalty is discretionary, as the AO must issue a show cause notice, provide an opportunity for the assessee to explain, and then decide based on the merits of the case. The Tribunal referred to various decisions, including those of the Visakhapatnam Bench and the case of Ravi Mathur vs. DCIT, which consistently held that the AO has discretion in levying the penalty and must consider the facts and circumstances before making a decision. The Tribunal also referenced the decision of the Hon'ble Allahabad High Court in Pr. CIT vs. Shri Sandeep Chandak, which supported the view that the penalty under section 271AAB is not automatic. Conclusion: The Tribunal allowed the appeal, holding that the penalty under section 271AAB is not mandatory but discretionary. It set aside the CIT(A)'s finding that the penalty was mandatory and deleted the penalty levied on the assessee, as the income surrendered did not fall within the definition of undisclosed income under section 271AAB. The Tribunal did not adjudicate the additional ground raised by the assessee regarding the validity of the penalty notice, as the issue became academic in light of the decision on the merits of the penalty. Order Pronounced: The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 23/09/2019.
|
