2012 (5) TMI 6 - AT - Income Tax

Penalty u/s 271AAA - Search and seizure - Undisclosed income - AO also initiated the penalty proceedings u/s 271 AAA and observed that Since the assessee has not paid the full taxes and interest on disclosure made u/s 132(4) penalty proceedings u/s 271AAA of the Act are initiated - Held that Once a time limit for payment of tax and interest has not been set out by the statute it cannot indeed be open to the Assessing Officer to read such a time limit into the scheme of the Section or to infer one - on the facts of the present case wherein entire tax and interest has been duly adjusted out of seized cash or otherwise paid in deference to notices of demand well before the penalty proceedings were concluded the assessee could not be denied the immunity under section 271AAA(2) only because entire tax along with interest was not paid before filing of income tax return or for that purpose before concluding the assessment proceedings - Appeal is dismissed

Summary

Issues:
- Appeal against penalties imposed under section 271AAA of the Income Tax Act, 1961 for assessment years 2007-08 and 2008-09.

Detailed Analysis:

Issue 1: Assessment and Penalty Proceedings
The Assessing Officer initiated penalty proceedings under section 271AAA for undisclosed income declared during search operations. The Assessing Officer observed that the assessee did not pay the full taxes and interest on the disclosed income, leading to the imposition of penalties. The assessee argued that taxes, along with applicable interest, were duly paid before the conclusion of penalty proceedings. However, the Assessing Officer imposed penalties as conditions under section 271AAA(2) were not fully met.

Issue 2: CIT(A) Decision
The CIT(A) noted that section 271AAA does not specify a precondition for payment of tax and interest before filing returns. The CIT(A) deleted the penalties as the due tax, along with interest, was paid before the conclusion of penalty proceedings. The Assessing Officer appealed this decision.

Issue 3: ITAT Decision
The ITAT analyzed section 271AAA, which mandates penalties for undisclosed income post-search operations. It highlighted that the statute does not set a time limit for tax and interest payments. The ITAT emphasized that the Assessing Officer cannot impose additional time limits beyond what the statute prescribes. Referring to a similar case, the ITAT clarified that the payment must be made before the conclusion of penalty proceedings, not before filing returns. Therefore, the ITAT upheld the CIT(A)'s decision to delete the penalties.

In conclusion, the ITAT dismissed the appeal, affirming that the assessee complied with the conditions of section 271AAA(2) by paying taxes and interest before the penalty proceedings concluded, even though the full payment was not made before filing returns.