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2022 (6) TMI 149 - AT - Income TaxLevy of penalty u/s 271AAB - Undisclosed Income - unexplained cash credits - assessee argued there is no deliberate intention of appellant to defraud the revenue for concealment of income - whether if the assessment proceedings are conducted in consequence to search carried out at the group s premises, and subsequently during the course of assessment, unexplained cash credits are unearthed, the penalty can be imposed under section 271AAB? - HELD THAT - Admittedly, in this case the unexplained cash credits were not discovered/unearthed during the course of search on Dhanjimama group, but were unearthed during the course of assessment proceedings on the assessee, albeit the assessment proceedings on the assessee were conducted as a consequence to search proceedings. A perusal of the assessment order reveals that the AO has not mentioned anything about unearthing of any undisclosed income in respect of the assessee, during search action carried out in the Dhanjimama group of cases on 03.07.2012. The income unearthed/discovered by the Assessing Officer during the course of assessment proceedings was independent and unconnected with the information found during the course of search action carried out in the Dhanjimama group of cases. Therefore, while the same may be relevant for assessment of the income under section 68 and also for the levy of penalty under section 271(1)(c) however, so far as penalty under section 271AAB of the Act is concerned, the foundation thereof is independent of assessment proceedings. Therefore, in the instant set of the facts, since no incriminating material was found during research carried out on Dhanjimama group of cases on 03.07.2012, which could have formed the basis of addition in our considered view, penalty could not have been imposed under section 271AAB of the Act only on the basis of addition on account of cash credits u/s 68 found during the course of assessment proceedings. Therefore, in our view, CIT(Appeals) has erred in fact and law in confirming action of the assessing officer imposing penalty under section 271AAB of the Act, in the instant set of facts. - Decided in favour of assessee.
Issues Involved:
1. Imposition of Penalty under Section 271AAB on addition made on account of Undisclosed Income. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271AAB on Addition Made on Account of Undisclosed Income: The case involves an appeal against the order of the Commissioner of Income Tax (Appeals) confirming the penalty of ?1,42,500 under Section 271AAB of the Income Tax Act for the assessment year 2012-13. The penalty was imposed due to an addition of ?4,75,000 on account of unexplained cash credits discovered during assessment proceedings following a search on the Dhanjimama group. The assessee contended that the penalty under Section 271AAB was not applicable since the undisclosed income was not unearthed during the search proceedings but during the assessment proceedings. The assessee argued that for invoking Section 271AAB, the undisclosed income should have been seized during the search, and the assessee's name did not appear in the list of persons with additional income disclosed during the search on the Dhanjimama group. The Tribunal noted that the unexplained cash credits of ?4,75,000 were discovered during the assessment proceedings and not during the search. The Tribunal emphasized that for penalty under Section 271AAB, the income must be found during the search, as stipulated by the definition of "undisclosed income" under Section 271AAB. The Tribunal referenced judicial precedents, including: - Shiv Bhagwan Gupta v. ACIT [2021] 125 taxmann.com 306 (Patna - Trib.): It was held that for penalty under Section 271AAB, the undisclosed income must be unearthed during the search, and the income found during assessment proceedings does not qualify unless it meets the specific definition under Section 271AAB. - Chandra Suresh Kothari v. DCIT [2022] 135 taxmann.com 275 (Nagpur - Trib.): It was held that if the penalty was not initiated based on undisclosed income found during the search, the penalty under Section 271AAB is not applicable. The Tribunal concluded that Section 271AAB is a self-contained code and operates independently of assessment proceedings. Since no incriminating material was found during the search on the Dhanjimama group that could form the basis of the addition of ?4,75,000, the penalty under Section 271AAB was not justified. The Tribunal held that the Commissioner of Income Tax (Appeals) erred in confirming the penalty imposed by the Assessing Officer. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the penalty under Section 271AAB was not applicable as the undisclosed income was discovered during the assessment proceedings and not during the search. The penalty imposed was thus quashed.
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