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2022 (7) TMI 20 - AT - Income TaxPenalty @ 10% u/s 271AAA - undisclosed income - HELD THAT - Issue decided in favour of assessee as relying on case of Garg Brothers Pvt. Ltd 2022 (3) TMI 1076 - ITAT KOLKATA assessee in its disclosure petition has conditionally offered to cover any other undisclosed income which has been unearthed during search. This action of assessee was out of abundant caution and conditional (provided there is material suggesting any undisclosed income un-earthed during search). However, finding that there was no other undisclosed income to identify with the seized materials/Panchanama, the assessee while filing the return of income pursuant to section 153A - taking note that the amount has been brought to tax by the AO though not shown by the assessee in the Return of Income, the penalty u/s. 271 AAA of the Act cannot be legally sustained. - Decided in favour of assessee.
Issues Involved:
1. Confirmation of penalty of Rs. 4 Lakhs under Section 271AAA of the Income Tax Act, 1961. 2. Determination of whether Rs. 40 Lakhs qualifies as "undisclosed income" for the purpose of levying penalty. Issue-wise Detailed Analysis: 1. Confirmation of Penalty of Rs. 4 Lakhs under Section 271AAA: The primary issue raised by the assessee was against the confirmation of a penalty of Rs. 4 Lakhs by the CIT(A), which was imposed by the AO at 10% under Section 271AAA of the Income Tax Act, 1961. This penalty was related to Rs. 40 Lakhs alleged to be undisclosed income. The background facts include a search and seizure operation conducted on the assessee's premises on 29.05.2012, leading to the filing of returns and subsequent assessments. The assessee had disclosed Rs. 3,98,15,530/- during the search, which included a conditional disclosure of Rs. 40,00,000/- for any discrepancies found in the books of accounts. The AO added this amount to the total income, which was confirmed by the CIT(A) on the basis of the disclosure made during the search proceedings. 2. Determination of Whether Rs. 40 Lakhs Qualifies as "Undisclosed Income": The assessee argued that the penalty was not justified as the Rs. 40 Lakhs was conditionally disclosed to cover any discrepancies that might be found, and no such discrepancies were identified. The assessee cited a decision in a similar case involving a sister concern, where the Tribunal had deleted the penalty on the grounds that the amount did not fall within the definition of "undisclosed income" under Section 271AAA. The Tribunal in the current case found that the issue was identical to the case of the sister concern and reproduced the relevant part of the earlier judgment, which clarified that the penalty under Section 271AAA is discretionary and not mandatory. The Tribunal noted that the Rs. 40 Lakhs was not discovered as undisclosed money, bullion, jewelry, or any valuable article or thing, nor was it an entry in the books of account or other documents found during the search. Therefore, it did not qualify as "undisclosed income" for the purpose of levying penalty under Section 271AAA. Conclusion: The Tribunal, after considering the arguments and the material on record, found that the issue was covered in favor of the assessee by the decision in the case of the sister concern. The Tribunal held that the Rs. 40 Lakhs did not fall within the definition of "undisclosed income" and therefore, the penalty under Section 271AAA was not warranted. Consequently, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the penalty. The appeal of the assessee was allowed. Order Pronouncement: The order was pronounced in the open court on 27th June, 2022.
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