2020 (3) TMI 334 - AT - Income Tax

Penalty u/s 271AAA - income declared which was offered by the assessee in his return of income - HELD THAT - A careful perusal of the order u/s 271AAA of the Act would show that the Assessing Officer has considered the amount of ₹ 2.44 crores, over and above the surrendered amount, and has computed the penalty accordingly. Since the issue relating to the sum of ₹ 2.44 crores is now well settled in favour of the assessee, in our considered opinion, the AO should now consider the amount of ₹ 4 crores which was offered u/s 132(4) of the Act and honoured in the return of income for levy of penalty u/s 271AAA. We, accordingly, restore this issue to the file of the Assessing Officer. AO is directed to consider the levy of penalty u/s 271AAA on the sum of ₹ 4 crores as per the provisions of law keeping in mind that the said sum was offered for taxation in the statement made u/s 132(4) of the Act and honoured in the return of income. Needless to mention, the Assessing Officer shall give reasonable and sufficient opportunity of being heard to the assessee. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues:
1. Imposition of penalty under section 271AAA of the Income Tax Act.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi involved the imposition of a penalty under section 271AAA of the Income Tax Act. The assessee contested the penalty imposed by the Assessing Officer, arguing that the ld. CIT(A) erred in confirming the penalty. The roots for the penalty lay in a search and seizure operation conducted at the assessee's premises. The Assessing Officer observed that the assessee had surrendered additional income during the search, but later retracted the statement, claiming it was made under a mistaken belief of fact/law. The Assessing Officer made an addition of ?2.44 crores to the assessee's income, which was over and above the income declared by the assessee. Subsequently, the penalty proceedings were initiated, and a penalty of ?64.40 lakhs was levied, which was upheld by the ld. CIT(A).

The Tribunal, in a previous order, held that the sum of ?2.44 crores was part of the declared amount of ?4 crores and no separate addition should be made. The Tribunal reasoned that the entire sales amount could not be brought to tax, considering the GP rate of the business. Therefore, the Tribunal directed the authorities to telescope the amounts and concluded that nothing over and above the declared ?4 crores was taxable. In light of this finding, the Tribunal restored the issue to the Assessing Officer to consider the penalty on the sum of ?4 crores offered by the assessee under section 132(4) of the Act.

The Tribunal directed the Assessing Officer to reevaluate the levy of penalty under section 271AAA on the sum of ?4 crores, considering that it was offered for taxation in the statement made under section 132(4) of the Act and honored in the return of income. The Assessing Officer was instructed to provide a reasonable opportunity for the assessee to be heard. Consequently, the appeal of the assessee was treated as allowed for statistical purposes, and the matter was restored to the Assessing Officer for further consideration.