2019 (2) TMI 1641 - AT - Income Tax

ITAT upholds CIT(A)'s decision on surrendered income under Income Tax Act 1961

ACIT-1 (1), Bhopal Versus Shri Sudeep Maheshwari AND Vice-Versa

The ITAT upheld the CIT(A)'s decision to delete the addition of surrendered income under section 132(4) of the Income Tax Act, 1961, due to lack of ... Addition on account of income surrendered as per statement recorded u/s 132(4) - no incriminating material or undisclosed income or investments were found during the course of search & seizure - assessee to buy peace of mind accepted and declared ₹ 3 crores in personal name - HELD THAT:- It is undisputed fact that the statement recorded u/s 132(4) has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of ₹ 69,59,000/- and ₹ 75,00,000/- in A.Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed. Penalty u/s 271(1)(c) - non assigning of reasons - HELD THAT:- We find that the notices issued by the A.O. are contrary to the laws laid down in the case of PCIT-I Vs. Kulwant Singh Bhatia [2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT] D.R. could not controvert the fact that notice issued by the A.O. for initiating penalty proceedings u/s 271(1)(c) does not assign any reason for initiating the penalty. Hence, it can be inferred that no specific charge is made for initiating the penalty. In the absence of the specific charge, the proceedings initiated for imposing penalty are vitiated in the light of the judgement of the Hon'ble jurisdictional High Court. We therefore, quash the penalty order being bad in law. - Decided in favour of assessee. Issues:1. Addition of surrendered income under section 132(4) of the Income Tax Act, 1961.2. Validity of penalty proceedings initiation.Analysis:Issue 1: Addition of surrendered income under section 132(4) of the Income Tax Act, 1961:The case involved appeals in quantum and penalty proceedings for the assessment years 2010-11 & 2008-09. The revenue appealed against the deletion of an addition of Rs. 2,25,00,000 made by the Assessing Officer based on income surrendered by the assessee during a search action. The CIT(A) deleted the addition, leading to the revenue's appeal. The revenue argued that the deletion was unjustified, citing a decision by the Delhi High Court. The assessee contended that no incriminating material was found during the search, and the surrendered income was due to mental pressure. The ITAT, after considering the arguments and case laws, upheld the CIT(A)'s decision. It emphasized the need for corroborative evidence to support additions based on statements recorded under section 132(4) and found the revenue failed to establish a connection between the surrendered income and incriminating material. Thus, the revenue's appeal was dismissed.Issue 2: Validity of penalty proceedings initiation:In the appeal by the assessee, the challenge was to the validity of penalty proceedings initiation. The assessee argued that the notice initiating the penalty was legally flawed, rendering the proceedings invalid. The ITAT observed that the notices issued for penalty proceedings did not comply with the requirements set by the jurisdictional High Court. The absence of specific charges in the notice led to the conclusion that the penalty proceedings were vitiated. Citing the judgment of the jurisdictional High Court, the ITAT quashed the penalty order as being bad in law. Consequently, the appeal by the assessee was allowed.In conclusion, the ITAT upheld the CIT(A)'s decision to delete the addition of surrendered income and quashed the penalty order due to the flawed initiation of penalty proceedings. The appeals were disposed of accordingly, with the revenue's appeal being dismissed, and the assessee's appeal being allowed.