2012 (5) TMI 623 - AT - Income Tax

Penalty levied u/s 271AAA - Held that - As far as first condition is concerned we find that assessee has fulfilled this condition as in the statement recorded at the time of search assessee in reply to question No.5 stated that he was disclosing Rs. 50, 00, 000/- representing net on money receipts on land dealings as income. Thus assessee clearly specified that income is earned by way of getting on money in land dealings. Coming to the second condition we have already observed that there is no dispute about the fact that neither at the stage of recording of statement of the assessee nor at the stage of assessment proceeding assess was asked either by the authorized officer or by the A.O. to substantiate the manner in which this undisclosed income was derived. Under these circumstances the assessee be deemed to have discharged his onus of substantiating the manner in which this undisclosed income was derived by him and therefore it cannot be said during penalty proceeding that assessee did not fulfill this condition. No infirmity in the order of ld. CIT(A) deleting this penalty - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty u/s 271AAA of Rs. 5,00,000 for failure to fulfill conditions prescribed u/s 271AAA of the Act.

Analysis:

Issue 1: Deletion of penalty u/s 271AAA

The case involved a search u/s 132 of the Income Tax Act where the assessee disclosed Rs. 50,00,000 of unaccounted income during the search, which was accepted by the Assessing Officer (A.O.). Subsequently, penalty proceedings u/s 271AAA were initiated for the undisclosed income. The A.O. levied a penalty of Rs. 5,00,000 as the assessee allegedly failed to fulfill the conditions prescribed u/s 271AAA(2) of the Act. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, citing that the assessee satisfied all conditions under section 271AAA(2) based on court decisions. The revenue challenged this decision.

Issue 2: Interpretation of Section 271AAA

During the appeal, the revenue contended that the court decisions relied upon by the CIT(A) were not applicable to penalty proceedings u/s 271AAA. The revenue argued that the burden on the assessee under section 271AAA(2) was higher compared to the conditions under explanation 5 to Section 271(1)(c). The revenue claimed that the assessee failed to provide sufficient details to substantiate the manner in which the income was earned, thus not meeting the exemption requirements under section 271AAA(2).

Issue 3: Compliance with Section 271AAA(2)

The Tribunal analyzed the exemption provision of Section 271AAA(2) which required the assessee to admit the undisclosed income, specify the manner of income derivation, substantiate the manner of income derivation, and pay the tax with interest. The A.O. argued that the assessee only fulfilled the third condition, leading to the penalty imposition. However, the Tribunal found that the assessee had specified the income derivation during the search statement and had paid the tax with interest. Notably, there was no request during the search or assessment proceedings to substantiate the income derivation. As the assessee met all three conditions for exemption, the Tribunal upheld the CIT(A)'s decision to delete the penalty.

Conclusion:

The Tribunal dismissed the revenue's appeal, affirming the deletion of the penalty u/s 271AAA of Rs. 5,00,000 as the assessee had satisfied all conditions under Section 271AAA(2) for exemption. The order of the CIT(A) was upheld, and the penalty was not imposed on the assessee.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments and decisions made by the authorities involved.