2016 (7) TMI 1231 - AT - Income Tax

Tribunal upholds CIT (A) orders on penalties, emphasizing adherence to specified conditions

The Deputy Commissioner of Income Tax, Central Circle-3, Jaipur Versus Shri Rahul Mangal and Others

The Tribunal upheld the CIT (A) orders deleting penalties under section 271AAA for three appeals by the revenue. The Tribunal found that the assessee had ... Penalty levied u/s 271AAA - undisclosed income - Held that:- There is no dispute with regard to the fact that the assessee has offered in his return of income the undisclosed income of ₹ 4,22,26,000/-. The same are duly recorded by the AO at para 5 of the assessment order. Nowhere in the assessment order, the AO recorded that the assessee was asked to specify or substantiate the manner in which the income has been derived and the assessee has failed to do so. The AO has merely recorded that the total income declared in the return of income for the specified year included the undisclosed income of ₹ 4,22,26,000/- which represented the unexplained money in the form of sundry creditor written off. Thus in this case AO has not correctly applied the provisions of section 271AAA of the Act which cannot be sustained, therefore, AO’s action for levying penalty being 10% of undisclosed income is hereby deleted. - Decided in favour of assessee Issues involved:Appeals by revenue against CIT (A) orders deleting penalty under section 271AAA of the Income Tax Act, 1961.Analysis:Issue 1:Penalty under section 271AAA - Whether CIT (A) was right in deleting the penalty of Rs. 42,22,600/- when the assessee had not fulfilled the requirement as per section 271AAA(2)(ii) of the Act.The AO initiated penalty proceedings under section 271AAA based on undisclosed income of Rs. 4,22,26,000/- declared by the assessee. The AO held the assessee liable for penalty as the manner in which the income was derived was not specified or substantiated. However, the CIT (A) allowed the appeal of the assessee, stating that the assessee satisfied all conditions under section 271AAA(2) by admitting the undisclosed income, specifying the manner in which it was derived, substantiating it, and paying the tax with interest. The Tribunal upheld the CIT (A) order, noting that the AO did not correctly apply the provisions of section 271AAA, leading to the deletion of the penalty. The revenue failed to provide contrary material, resulting in the dismissal of the appeal.Issue 2:Consistency in decisions for multiple appeals.The facts in the subsequent appeals (ITA Nos. 1027 & 1028/JP/2015) were the same as in ITA No. 1026/JP/2015 with only changes in figures. Following the reasoning and decision in the first appeal, the Tribunal applied the same decision to the subsequent appeals and dismissed the revenue's appeals collectively.In conclusion, the Tribunal upheld the CIT (A) orders deleting the penalty under section 271AAA for all three appeals by the revenue, emphasizing the importance of fulfilling the specified conditions under the Act for imposing penalties. The consistent application of legal principles across the appeals ensured uniformity in the decisions.