2015 (9) TMI 133 - AT - Income Tax

Assessee granted penalty immunity under Income Tax Act Section 271AAA(2)

The Tribunal found that the assessee met the conditions under Section 271AAA(2) of the Income Tax Act, qualifying for immunity from penalty. As a result, ... Levy of penalty u/s 271AAA - Held that:- It is seen from the assessment order that the ld. AO had stated that the assessee had no option but to accept the truth and come forward with the disclosure and hence concluded that but for the search the assessee would not have come forward with the offer of undisclosed income and on that ground levy of penalty is justified. We find that if this argument of the ld. AO is to be appreciated, then the very purpose of providing immunity u/s 271AAA(2) of the Act gets defeated. The legislature in its wisdom had provided for granting immunity from levy of penalty in certain circumstances as contemplated in 271AAA(2) of the Act. The levy of penalty u/s 271AAA cannot be made automatic pursuant to the search. It is seen that even though the income of ₹ 27,88,222/- was not offered by him in the regular return filed by the assessee on 31.03.2009 for A.Y. 2008-09, it is of no consequence as in terms of 153A of the Act, it becomes a pending proceeding, which gets abated pursuant to the search. Thus we hold that the assessee had cumulatively satisfied the three conditions contemplated in section 271AAA(2) of the Act and accordingly is eligible for immunity from levy of penalty - Decided in favour of assessee. Issues Involved:1. Whether the CIT(A) was correct in confirming the levy of penalty under Section 271AAA of the Income Tax Act, 1961.Detailed Analysis:1. Confirmation of Penalty under Section 271AAA:The primary issue in these appeals was the confirmation of the levy of penalty under Section 271AAA of the Income Tax Act, 1961, by the CIT(A). The appeals arose from the order of the CIT(A)-Central-II, Kolkata, confirming the levy of penalty for the assessment years 2008-09 and 2009-10.2. Facts of the Case:A search was conducted at the premises of the assessee on 11.09.2008. During the search, the assessee made a disclosure under Section 132(4) of the Act, offering undisclosed income of Rs. 1,60,06,550 for both assessment years. The assessee filed a regular return of income for A.Y. 2008-09 on 31.03.2009, declaring taxable income of Rs. 7,21,387, which was within the time limit prescribed under Section 139(4) of the Act. The assessee later revised the disclosure statement, realizing a genuine mistake, to Rs. 27,88,222 for A.Y. 2008-09 and Rs. 1,59,71,000 for A.Y. 2009-10. The assessee disclosed this income in the return filed in response to the notice under Section 153A of the Act.3. Arguments by the Assessee:The assessee argued that the disclosure made during the search was genuine and included the correct figures after realizing the initial mistake. The assessee substantiated the manner in which the undisclosed income was derived and paid the taxes due, albeit through the adjustment of seized cash. The assessee contended that the conditions under Section 271AAA(2) were satisfied, and thus, immunity from penalty should be granted.4. Arguments by the Revenue:The Revenue argued that the assessee did not clearly substantiate the manner in which the undisclosed income was derived and failed to pay the taxes together with interest on the undisclosed income promptly. The Revenue maintained that the cumulative conditions under Section 271AAA(2) were not satisfied, and therefore, the penalty was justified.5. Tribunal's Findings:The Tribunal found that the assessee had indeed substantiated the manner of deriving the undisclosed income and had paid the taxes due through the adjustment of seized cash. The Tribunal noted that the statute did not prescribe a specific time limit for the payment of taxes and interest on the undisclosed income. The Tribunal referenced several judicial precedents, including CIT vs. Suresh Chandra Mittal and CIT vs. Careers Education and Infotech P. Ltd., to support the argument that the penalty could not be imposed if the conditions for immunity were satisfied.6. Conclusion:The Tribunal concluded that the assessee had cumulatively satisfied the three conditions under Section 271AAA(2) of the Act, thereby qualifying for immunity from the levy of penalty. The appeals of the assessee were allowed, and the penalty under Section 271AAA was set aside.Order Pronounced:The appeals of the assessee were allowed, and the order was pronounced in the court.