2023 (5) TMI 471 - AT - Income Tax

Penalty u/s. 271AAA - undisclosed income found as a result of search - CIT- A deleted penalty levy - HELD THAT:- There is no material on record to suggest that additional income offered at the hands of Assessee is by way of any entry in respect of an expenditure recorded in the books of account or other documents maintained in the normal course.

Aforesaid factual position is fortified on the assessment order itself, as Assessing Officer has not made any addition on account of the disclosure made at the time of search and seizure operation. The additions made by him in the assessment order, as discussed earlier, is on account of estimation of business profits after rejection of books of account and disallowance u/s. 14A. Aforesaid facts clearly demonstrate that the search and seizure operation conducted in case of Assessee did not unearth any undisclosed income within the definition as provided in Explanation to section 271AAA of the Act.

In quantum proceedings, Assessee has got the desired relief as the addition sustained by the ld. First Appellate Authority has been deleted. In any case of the matter, on overall analysis of facts and material on record, we are convinced that there is no undisclosed income relating to specified previous year which could have enabled the Assessing Officer to invoke the provisions of section 271AAA - Decided in favour of assessee.

Scope of exceptions provided in sub-section (2) of section 271AAA - Whether disclosure made at the time of search and seizure operation, cannot be construed as undisclosed? - HELD THAT:- Assessee has not only offered such income in statement recorded under sub-section (4) of section 132, but specified/substantiated the manner in which such income was derived. It is relevant to observe, while deciding Assessee’s appeal against addition made in the assessment order, ld. Commissioner (Appeals) had deleted the additions.

Tribunal in turn in order [2020 (3) TMI 115 - ITAT DELHI] has held that additional income declared by Assessee is connected with the business activity of Assessee, hence, is in the nature of business income, which has rightly been taken into profit and loss account. Tribunal has given a categorical finding of fact that Assessing Officer has not brought any material on record to demonstrate that Assessee was doing any other business to which the surrendered income could be linked.

Accordingly, the order of ld. Commissioner (Appeals) was upheld. Thus, on the basis of aforesaid facts, it is clearly established that whatever undisclosed income earned by Assessee was offered to tax in the manner specified in sub-section (2) to section 271AAA of the Act. That being the case, Assessee’s case falls within the exception provided under section 271AAA (2)

Revenue both appeal dismissed.