2023 (9) TMI 1160 - AT - Income Tax

Penalty proceedings u/s 271AAB - additional income admitted by the assessee - suo-moto admission by assessee - as assessee contended before the learned CIT(A) that no incriminating material was found during the search and the additional income was admitted to buy peace and to avoid litigation and the same is not a tangible income as the said income has not been credited in its books nor has come out of any incriminating evidence seized during the course of search - HELD THAT - In this case, from the beginning the assessee has been claiming that only to purchase piece, he has been disclosing additional income. As rightly pointed out by the learned CIT(A), the income disclosed by the assessee is not represented by any of the categories mentioned in clause (c) of explanation to section 271AAB inasmuch as the assessee has never taken any entry of the un-disclosed income in its books nor the same is corroborated to any entry in the books or any incriminating material nor does the same pertaining to any false expenditure claimed by the assessee; and also that the learned Assessing Officer did not bring out anything on record to prove that the surrendered income pertains to any entry in the books of the assessee or to any false expenditure claimed by the assessee. It is also not the case of the Revenue that the assessee admitted the additional income on account of any incriminating material that was unearthed during the course of search. In the circumstances, respectfully following the view taken in the case of Padam Chand Pungliya 2019 (4) TMI 565 - ITAT JAIPUR we hold that the disclosure of additional income in the statement recorded under section 132(4) of the Act itself is not sufficient to levy penalty u/s 271AAB of the Act until and unless income so disclosed by the assessee falls in the definition of undisclosed income defined in explanation to section 271AAB(1) - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of penalty proceedings under section 271AAB of the Income Tax Act.
2. Definition and applicability of "undisclosed income" under section 271AAB.
3. Evidentiary value of statements made under section 132(4) of the Act without supporting incriminating material.

Summary:

Legitimacy of Penalty Proceedings under Section 271AAB:
The Revenue appealed against the order of the CIT(A) which deleted the penalty of Rs. 60 lakhs levied under section 271AAB of the Income Tax Act. The assessee argued that no incriminating material was found during the search, and the additional income was admitted merely to buy peace and avoid litigation. The CIT(A) concluded that the Assessing Officer did not identify any discrepancies or seized material indicating concealment of income, and thus, the penalty could not be sustained.

Definition and Applicability of "Undisclosed Income" under Section 271AAB:
The CIT(A) found that the undisclosed income admitted by the assessee did not fall within the categories defined under clause (c) of the explanation to section 271AAB. The assessee had not recorded the undisclosed income in its books, nor was it corroborated by any incriminating material or false expenditure claims. The CIT(A) held that the penalty was levied merely based on the assessee's admission without any supporting discrepancies or incriminating material.

Evidentiary Value of Statements under Section 132(4) Without Supporting Incriminating Material:
The Tribunal noted that the Assessing Officer did not refer to any incriminating document to justify the addition of Rs. 1 crore. The Tribunal referenced several cases, including PCIT vs. Shri Ramdass Motor Transport and Padam Chand Pungliya vs. ACIT, to emphasize that mere disclosure of income under section 132(4) without supporting incriminating material does not suffice to levy a penalty under section 271AAB. The Tribunal concluded that the penalty under section 271AAB is not mandatory and requires a thorough examination of the facts and circumstances of the case.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalty, concluding that the additional income disclosed by the assessee did not meet the definition of "undisclosed income" under section 271AAB. The appeal of the Revenue was dismissed.