Tribunal remands case for tax verification, following Supreme Court guidance. Assessee's appeal allowed for statistical purposes.

The Tribunal remanded the case to the AO to verify the assessee's claim on paying the remaining tax liability, following the Supreme Court's guidance in ACIT vs. Gebilal Kanhailal HUF. The appeal of the assessee was allowed for statistical purposes.

---

---

Issues Involved:
1. Eligibility for immunity under Section 271AAA(2) of the Income Tax Act, 1961.
2. Levy of penalty under Section 271AAA of the Income Tax Act, 1961.

Detailed Analysis:

1. Eligibility for Immunity under Section 271AAA(2):

The assessee contended that he should be eligible for immunity under Section 271AAA(2) since he had admitted the undisclosed income, specified the manner of earning, and paid taxes to the extent possible. During the search action under Section 132, the assessee initially admitted an income of Rs. 60 lakhs but later revised this to Rs. 3.60 crores after verifying the seized materials. The assessee argued that the enhanced disclosure should be considered as part of the statement recorded under Section 132(4).

The Commissioner of Income Tax (Appeals) noted that the assessee did not specify the manner of earning the undisclosed income in the statement recorded under Section 132(4) and failed to substantiate it. However, the Commissioner acknowledged that no specific questions were asked to the assessee regarding the manner of earning during the assessment proceedings. The Commissioner cited the Gujarat High Court's decision in Mahendra C. Shah, which held that substantial compliance with the conditions could suffice for immunity from penalty.

2. Levy of Penalty under Section 271AAA:

The Assessing Officer (AO) levied a penalty of Rs. 27,20,443, which is 10% of the undisclosed income, on the grounds that the assessee did not fulfill all the conditions for immunity under Section 271AAA. Specifically, the AO pointed out that the assessee did not specify the manner of earning the income in the statement recorded under Section 132(4) and failed to pay the tax along with interest on the undisclosed income.

The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing that the assessee did not pay the entire tax liability on the undisclosed income, which was a mandatory condition for immunity under Section 271AAA. The Commissioner rejected the assessee's request for proportionate relief, stating that the statute does not provide for such relief.

Tribunal's Findings:

The Tribunal noted that the assessee had admitted undisclosed income of Rs. 60 lakhs during the search and later enhanced the disclosure to Rs. 3.60 crores voluntarily. The Tribunal agreed that the assessee had satisfied the first condition of admitting the undisclosed income. Regarding the second condition, the Tribunal observed that the assessee was not asked specific questions about the manner of earning the income, aligning with the Gujarat High Court's decision in Mahendra C. Shah.

For the third condition, the Tribunal found that the assessee had paid only Rs. 36,47,878 out of the total tax and interest payable of Rs. 91,13,090. The Tribunal emphasized that the conditions under Section 271AAA(2) are mandatory, and there is no provision for proportionate relief. However, the Tribunal acknowledged the assessee's claim that the remaining tax liability had been paid and decided to verify this claim.

Conclusion:

The Tribunal restored the matter to the AO to verify the assessee's claim regarding the payment of the remaining tax liability and to decide the matter afresh, considering the Supreme Court's direction in ACIT vs. Gebilal Kanhailal HUF. The appeal of the assessee was allowed for statistical purposes.

---