2020 (7) TMI 713 - AT - Income Tax

Penalty u/s 271AAB - Addition u/s 69B - income shown suo-motto - additional income brought to tax by the Assessing Officer - Undisclosed income admitted and declared in the return of income - HELD THAT - Penalty has been initiated in respect amount admitted by the assessee pursuant to search conducted on 13.08.2013. Given that the assessee had only disclosed a sum of ₹ 5.2 lacs in the revised return filed on 9.11.2013, subsequent to date of search and thereafter, in the return filed on 16.02.2015 in response to notice u/s 153A, the Assessing officer has brought the balance amount of ₹ 80,000/- to tax during the course of assessment proceedings. However, as far as initiation of penalty proceedings u/s 271AAB is concerned, the same has been initiated on the whole of the sum of ₹ 6 lacs admitted by the assessee pursuant to search. Second contention of the ld AR that the assessee had cash in hand of ₹ 80,000/- as on 31.03.2013 and the same has been utilized in making the investment for purchase of land. What needs to be seen is the source of investment at the point in time when the investment was made. In the instant case, the sale deed has been registered on 5.4.2012, therefore, what needs to be seen is whether the assessee was having sufficient cash in hand on or before 5.4.2012 reflected in its books of accounts to make such investment, however, there is nothing on record to substantiate the same. None of the conditions for levy of penalty at the lower rate of 10%, under clause (a) of Section 271AAB (1), are satisfied. Accordingly, it is held that in respect of the income penalty is leviable at 30% under clause (a) of Section 271AAB(1) - Decided against assessee.

Summary

Issues:
- Initiation of penalty u/s 271AAB on undisclosed income
- Justification for penalty on undisclosed investment in Land

Analysis:

1. Initiation of penalty u/s 271AAB on undisclosed income:
The appeal was filed against the order of the ld. CIT(A)-2, Udaipur, where the assessee raised revised grounds of appeal related to penalty proceedings under section 271AAB of the Income Tax Act. The Assessing Officer (AO) had initiated penalty proceedings on undisclosed income admitted by the assessee, with specific focus on an amount of ?80,000 not offered in the revised return. The ld AR argued that penalty was only initiated for the ?80,000 amount and not for the total undisclosed income of ?6,00,000. However, the Tribunal disagreed, stating that penalty proceedings were indeed initiated for the entire sum admitted by the assessee post-search, leading to the dismissal of the first contention.

2. Justification for penalty on undisclosed investment in Land:
The second issue revolved around the penalty levied on an addition of ?80,000 made under section 69B of the Act. The ld AR contended that the assessee had sufficient cash in hand to justify the investment in Industrial Land, even though only ?5.20 lakh out of the total investment of ?6,00,000 was disclosed. The argument was that since the cash in hand was not disputed by the AO, the penalty was not justified. However, the Tribunal upheld the penalty, stating that the source of investment at the time of making the investment needed to be substantiated, which was not done in this case. The Tribunal confirmed the penalty levied by the AO under section 271AAB.

In conclusion, the Tribunal dismissed both grounds raised by the assessee, upholding the penalty levied by the AO under section 271AAB. The decision was made in favor of the Revenue, and the appeal of the assessee was accordingly dismissed.