2017 (4) TMI 1429 - AT - Income Tax

Tribunal Upholds Deletion of Penalty in Income Tax Appeal

The Tribunal dismissed the Revenue's appeal against the deletion of a penalty of Rs. 1,50,00,000 under section 271AAA of the Income Tax Act, 1961 for the ... Penalty u/s 271AAA - assessee failed to disclose the manner of earning this undisclosed income of ₹ 15 crores - HELD THAT:- A bare perusal of this section would indicate that sub-section (1) authorise the AO to levy penalty at the rate of 10% of the undisclosed income of the specified previous year. Sub-section (2) provides conditions on whose fulfillment the assessee could be absolved from the levy of penalty. A perusal of sub-section (2) would indicate that it postulates three conditions for an assessee on whose fulfillment he will be absolved from levy of penalty. In the present case, in the assessment order the AO himself did not dispute that during the course of search, it was admitted by Shri Alpeshbhai Kotadiya that this income was earned by accepting on-money in its building project “Green City”. This manner has also been disclosed. It has also been pointed out that the undisclosed income was received by the assessee as on-money. Thus, taking into consideration facts and circumstances, we are of the view that the CIT(A) has rightly deleted the penalty, and accordingly, we dismiss the appeal of the Revenue. Issues:- Appeal against deletion of penalty under section 271AAA of the Income Tax Act, 1961.Analysis:1. The Revenue appealed to the Tribunal against the deletion of a penalty of Rs. 1,50,00,000 imposed by the Assessing Officer (AO) under section 271AAA for the Assessment Year 2011-12.2. The case involved a firm engaged in housing projects where a search under section 132 revealed undisclosed income of Rs. 15 crores. The AO initiated penalty proceedings under section 271AAA as the assessee failed to substantiate the manner in which the undisclosed income was derived.3. The AO computed a penalty of 10% of the undisclosed income, amounting to Rs. 1.50 crores. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty after finding that the assessee successfully demonstrated the manner of earning the income.4. The Tribunal analyzed section 271AAA which allows for a penalty of 10% of undisclosed income unless certain conditions are met by the assessee. In this case, it was acknowledged that the undisclosed income was earned through on-money payments in a building project, and the manner of earning was disclosed.5. The Tribunal concluded that the CIT(A) rightly deleted the penalty as the conditions under section 271AAA(2) were fulfilled by the assessee. Therefore, the appeal of the Revenue was dismissed, upholding the decision to delete the penalty.6. The judgment was pronounced by the Tribunal in Ahmedabad on 10th April 2017.