2014 (1) TMI 1755 - AT - Income Tax

Penalty imposed u/s 271 AAA - Held that - The assessee has declared undisclosed income in the return filed u/s 153A and paid tax along with the interest and the provision of section 271AAA(1) will not be applicable as the assessee complied with the conditions mentioned u/s 271AAA(2) of the Act. The assessee admitted the undisclosed income in the course of search in the statement recorded u/s 132(4) of the Act and also specific manner in which the income has been derived by him. The manner disclosed by the assessee had been accepted by the AO. The assessee has also paid the tax and interest in respect of undisclosed income. The undisclosed income as well as the specified year are defined in the Explanation 2 to section 271AAA of the Act. Thus in our opinion the assessee has complied with the conditions as given u/s 271AAA(2) - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty imposed by the AO u/s 271AAA of the I.T. Act.

Detailed Analysis:

1. Deletion of Penalty Imposed by the AO u/s 271AAA of the I.T. Act:

A search and seizure action u/s 132 of the I.T. Act was conducted on 24.04.2008 in the case of 'Sri Ram Sonthalia & Kushal Group'. Subsequently, the assessee disclosed Rs. 1,25,00,000/- u/s 132(4) during the search. Notice u/s 153A was issued for A.Yrs. 2003-04 to 2008-09. The assessee, involved in real estate, manufacturing of sponge iron, and logistics, filed returns including the undisclosed income. The AO completed the assessment and initiated penalty proceedings u/s 271AAA, imposing penalties of Rs. 14,16,250/- for A.Yr. 2008-09 and Rs. 5,66,500/- for A.Yr. 2009-10.

The assessee appealed to the CIT(A), who deleted the penalties. The CIT(A) observed that the AO accepted the disclosure made by the appellant and included it in the return of income. The AO did not discuss any seized documents revealing undisclosed income. The appellant voluntarily disclosed the income u/s 132(4), declared it in the return filed u/s 153A, and paid the tax with interest. The CIT(A) noted that the AO had no material evidence of undisclosed income and that the appellant's disclosure was voluntary to avail immunity from penalty.

The CIT(A) further stated that the conditions of sub-section (2) of section 271AAA were satisfied as the appellant admitted the undisclosed income, specified the manner it was derived, and paid the tax. The AO's view that the benefit under sub-section (2) was not applicable because the income was not declared in the return filed u/s 139(1) was incorrect. The appellant's compliance with the conditions of sub-section (2) meant sub-section (1) was not applicable. Therefore, the AO was not justified in imposing the penalty.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee declared the undisclosed income in the return filed u/s 153A, paid the tax with interest, and complied with the conditions of section 271AAA(2). The assessee admitted the undisclosed income during the search and specified the manner it was derived, which was accepted by the AO. The Tribunal referenced several supporting decisions, including Pramod Kumar Jain vs DCIT and Concrete Developers vs ACIT, and found no contrary decisions presented by the Revenue.

Conclusion:

The Tribunal dismissed the Revenue's appeals for A.Yrs. 2008-09 and 2009-10, and similarly dismissed all related appeals involving other assessees with similar facts. All appeals filed by the Revenue were dismissed, and the order was pronounced on 17.01.2014.