Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (7) TMI 1882 - AT - Income TaxLevy of penalty u/s 271AAB - AO has not specified the grounds for levy of penalty and even has not specified the clause of Section 271AAB for levy of penalty equivalent 10% or 20% or 30% of the undisclosed income - assessee surrendered undisclosed income consequent to search and seizure proceeding - Held that:- Levy of penalty U/s 271AAB is not mandatory but the AO has discretion to take a decision and the same shall be based on judicious decision of the AO. As regards the validity of notice U/s 274 for want of specifying the ground and default of the assessee the Tribunal has held that the AO is required to specifically state in the show cause notice the ground and the default committed by the assessee as to attract the penalty U/s 271AAB of the Act @ 10% 20% or 30% of the undisclosed income. In the absence of specifying the default and charge against the assessee for which the penalty was proposed to be levied the show cause notice issued by the AO and initiation of proceeding for levy of penalty U/s 271AAB are not valid. Hence, following the earlier order of this Tribunal we hold that the show cause issued by the AO in the case assessee is not sustainable and liable to the quashed. AO has accepted the explanation of the assessee regarding substantiation of the manner for earning the undisclosed income in question. The details of the entries in the seized material disclose certain amounts are recorded as advance to the persons, expenditure on construction of house and expenditure on the marriage of daughter. Thus, measure amount of undisclosed income consisted the sundry advances. All these transactions do not pertain to the business activity of the assessee but these are either advances given by the assessee or expenditure incurred on construction of the house or expenditure on the marriage of the daughter. Therefore, the entries in the seized material are not the transactions generating income except some interest income. When the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Thus we hold that the penalty levied under section 271AAB is not sustainable and the same is deleted . See SHRI RAVI MATHUR, VERSUS THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4, [2018 (6) TMI 1128 - ITAT JAIPUR] - decided in favour of assessee For assessment year 2014-15 - disclosure was made by the assessee on the basis of the valuation of the stock as per the valuation report of the department valuer apart from a disclosure of ₹ 20 lacs on account of interest income - Held that:- In the absence of any discrepancy in the quantity of stock the valuation of the stock is purely a question of assessment and cannot be held as undisclosed income detected during the course of search and seizure proceeding. Therefore, to the extent of excess stock based on the valuation report the disclosure of the income by the assessee would not fall in the category of undisclosed income as per explanation to Section 271AAB. It is not the case of the Revenue that any stock of jewellery was found which is not recorded in the books of account but the value of stock is computed based on the valuation report of the departmental valuer. Once the difference in the value of stock is only due to market price as against the cost of the said stock, the same will not fall in the ambit of undisclosed income as defined under clause-(c) of explanation -1 of section 271AAB of the Act. Similarly the accrued interest is also only estimated and not based on any incriminating documents. This amount was estimated as there were advances as per the entries of the seized material. Even otherwise accrued interest is dependent on the outcome of the levy of penalty in respect of advances given by the assessee. We have considered the issue of advances for the assessment year 2013-14 and accordingly in view of our finding on the said issue the penalty U/s 271AAB of the Act is not sustainable in respect of the surrender amount - Decided in favour of assessee.
|