2018 (2) TMI 1777 - AT - Income Tax

Tribunal grants appeal against penalty under Income Tax Act, emphasizes significance of specific queries

Shri Jagdishbhai B. Chandarana Versus The ACIT Circle-7 (2) Ahmedabad

The Tribunal allowed the appeal filed by the assessee against the penalty imposed under section 271AAA of the Income Tax Act. It held that the assessee ... Penalty u/s 271AAA - voluntary disclosure of income - 'manner’ of deriving undisclosed income - Held that:- A bare perusal of statement recorded under s.132(4) shows that no specific question were confronted to the assessee about the ‘manner’ in which the aforesaid undisclosed income were earned and towards ‘substantiation’ thereof. It is well settled by long line of judicial precedents including the decision of Hon’ble Gujarat High Court in the case of CIT vs. M/s.Mahendra D.Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) and Pr.CIT vs. Mukeshbhai Ramanlal Prajapati (2017 (7) TMI 966 - GUJARAT HIGH COURT) to hold that in the absence of any query raised by the Revenue towards ‘manner’ of deriving undisclosed income and ‘substantiation’ of the ‘manner’, the obligation to meet the aforesaid requirement for claiming immunity cannot be fastened on the assessee. Admittedly, the assessee has included the undisclosed income as recorded under s.132(4) of the Act and paid taxes thereon together with interest while filing the return of income. Therefore, in our considered view, the assessee has substantially complied with the conditions specified under s.271AAA(2) of the Act for exoneration from the clutches of penalty proceedings under s.271AAA of the Act. - Decided in favour of assessee Issues:Imposition of penalty under section 271AAA of the Income Tax Act, 1961 on the assessee for voluntary disclosure of undisclosed income during a search action.Analysis:1. Background and Assessment: The appeal was filed by the assessee against the penalty imposed by the Assessing Officer (AO) under section 271AAA of the Income Tax Act, 1961. The search action was conducted in the residential premises of the assessee, and the assessee voluntarily disclosed an undisclosed income of Rs. 2 crores during the assessment year 2011-12. The AO completed the assessment and imposed a penalty of Rs. 20 lakhs, which was confirmed by the Commissioner of Income Tax(Appeals) (CIT(A)).2. Grounds of Appeal: The assessee contended that the disclosure of the undisclosed income was voluntary and made without any incriminating material found during the search. The assessee argued that no specific questions were raised regarding the manner in which the undisclosed income was earned, and thus, the penalty under section 271AAA should not have been imposed.3. Arguments and Submissions: The assessee's representative highlighted that the undisclosed income was declared out of certain land dealings, and the manner of earning the alleged undisclosed income was disclosed. It was emphasized that the assessee had fulfilled the substantial requirements for immunity from penalty under section 271AAA by including the undisclosed income in the return and paying taxes on it.4. Judgment: The Tribunal considered the submissions and held that the assessee had admitted the undisclosed income voluntarily and had substantially complied with the conditions specified under section 271AAA(2) of the Act. Citing judicial precedents, the Tribunal noted that in the absence of specific queries regarding the manner of deriving undisclosed income, the obligation to meet such requirements for claiming immunity cannot be imposed on the assessee. Therefore, the Tribunal allowed the appeal and directed the AO to delete the penalty imposed under section 271AAA of the Act.5. Conclusion: The Tribunal's decision in favor of the assessee was based on the voluntary disclosure of undisclosed income, lack of incriminating material, and substantial compliance with the statutory requirements for immunity from penalty under section 271AAA. The judgment emphasized the importance of specific queries and substantiation in penalty proceedings related to undisclosed income during search actions.