2018 (2) TMI 748 - AT - Income Tax

Penalty u/s 271AAA - Held that - We find in the assessment order the A.O has categorically mentioned that the assessee company has declared the amounts surrendered as miscellaneous income under the head income from other sources. A perusal of the assessment order shows that the assessee has surrendered the income explained the manner in which it was earned and has paid the taxes due thereon. Therefore the assessee has fulfilled all the conditions laid down in Section 271AAA for non-levy of penalty under the said provisions. Even otherwise also it is an admitted fact that no search has taken place in the premises of the assessee and therefore provisions of Section 271AAA are not at all applicable. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271AAA of the Income Tax Act.
2. Applicability of Section 271AAA to the assessee.

Issue-Wise Detailed Analysis:

1. Deletion of Penalty Levied Under Section 271AAA:

The Revenue's appeal contested the deletion of a penalty amounting to Rs. 22,71,150/- imposed by the Assessing Officer (A.O.) under Section 271AAA of the Income Tax Act. The core issue revolved around whether the conditions for imposing such a penalty were met. The A.O. argued that during the search operation, the assessee had surrendered Rs. 2.10 crores due to discrepancies in its books of accounts and documents seized from its premises. The A.O. claimed that the assessee failed to specify and substantiate the manner in which the undisclosed income was derived, and this income was not recorded in the books of accounts or disclosed to the tax authorities before the search. Consequently, the A.O. levied the penalty under Section 271AAA.

However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, observing that the A.O.'s premise was mistaken. The CIT(A) noted that the search was conducted at the premises of M/s Aggarwal Associates and Jainco Group, not the assessee. The documents forwarded to the A.O. by the A.O. of the searched party were the basis of the assessment under Section 153C, not a direct search on the assessee. The CIT(A) emphasized that the penalty under Section 271AAA was not applicable since the search was not conducted on the assessee itself.

2. Applicability of Section 271AAA to the Assessee:

The Tribunal examined whether Section 271AAA was applicable to the assessee. Section 271AAA pertains to cases where a search under Section 132 of the Income Tax Act has been initiated. The Tribunal noted that the search on 19th October 2011 was not conducted on the assessee but on M/s Aggarwal Associates and Jainco Group. The assessment of the assessee was completed under Section 153C based on documents received from the searched party.

The Tribunal upheld the CIT(A)'s decision, agreeing that the provisions of Section 271AAA were not applicable to the assessee. The Tribunal highlighted that the assessee had declared the surrendered income, explained the manner of earning it, and paid the due taxes, fulfilling all conditions laid down in Section 271AAA for non-levy of penalty. The Tribunal also emphasized that no search had taken place at the assessee's premises, making Section 271AAA inapplicable.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order to delete the penalty under Section 271AAA. The Tribunal concluded that the penalty provisions of Section 271AAA were not applicable to the assessee since no search was conducted on its premises, and the assessee had complied with all necessary conditions for non-levy of penalty under the said section. The Tribunal's decision was pronounced in the open court on 12th February 2018.