2019 (2) TMI 1654 - AT - Income Tax

Tribunal upholds deletion of penalty under Income Tax Act, emphasizing need for corroborating evidence

The tribunal upheld the CIT(A)'s decision to delete the penalty imposed on the assessee under Section 271AAB of the Income Tax Act, 1961. It emphasized ... Penalty u/s 271AAB - no incriminating evidence, papers/documents/stock/cash were found during the search operation other than the statement of the assessee - AO treated the assessee’s additional income as undisclosed income u/s 271AAB Explanation (c) - HELD THAT:- We find no merit in Revenue’s instant arguments in view of decision of this tribunal’s coordinate bench’s in DCIT vs. M/s. Rashmi Metaliks Ltd. [2019 (2) TMI 1651 - ITAT KOLKATA] pertaining to the very search as well as above stated incriminating documents deleting identified penalty. It was held that applying both the limbs contained in clause (c) of Explanation to Section 271AAB, the additional income offered by the assessee through its joint declaration was neither represented by any assets found in the course of search nor represented by any entry made in the books of accounts or other documents or transactions found in the course of search. it was further that the income voluntarily offered by the assessee did not come within the ambit and scope of the expression ‘undisclosed income’ as defined for the purposes of Section 271AAB It has come on record that the Revenue seeks to rely upon the same very material as it was used in assessee’s sister concern’s case pertaining to the very search wherein its identical grievance stands declined vide above extracted detailed discussion. We adopt the said reasoning mutatis mutandis in the instant case as well as no distinction on facts and law has been pointed out at the Revenue’s behest. The CIT(A)’s order under challenge deleting the impugned penalty is confirmed accordingly. - Revenue’s appeal is dismissed. Issues Involved:1. Delay in filing the appeal.2. Validity of penalty imposition under Section 271AAB of the Income Tax Act, 1961.3. Interpretation of 'undisclosed income' under Section 271AAB.4. Discretionary nature of penalty imposition under Section 271AAB.Detailed Analysis:1. Delay in Filing the Appeal:The Revenue’s appeal was delayed by four days. The delay was attributed to various procedural formalities at the departmental level. The respondent’s counsel did not dispute these reasons. Consequently, the tribunal condoned the four-day delay, deeming it neither intentional nor deliberate.2. Validity of Penalty Imposition under Section 271AAB:The primary issue was whether the penalty imposed under Section 271AAB was valid. The Assessing Officer (AO) had imposed a penalty of Rs. 3,09,69,700/- on the assessee for the assessment year 2013-14, which the Commissioner of Income Tax (Appeals) [CIT(A)] reversed. The CIT(A) found that the assessee had declared the income suo moto to avoid litigation and buy peace of mind, and no incriminating evidence was found during the search operation except for cash of Rs. 3,03,000/-. The CIT(A) referenced the Supreme Court's ruling in Dilip N Shroff vs. CIT, which held that imposition of penalty is not automatic and requires the AO to exercise discretion considering relevant factors. The CIT(A) also cited the case of Punjab Tyres, where it was held that surrender made to purchase peace does not amount to admission constituting evidence of concealment in penalty proceedings. Further, the CIT(A) referred to Sudharsan Silk and Sarees, where the Supreme Court held that if an amount is offered for taxation to purchase peace, penalty provisions should not apply unless there is corroborating evidence of concealment.3. Interpretation of 'Undisclosed Income' under Section 271AAB:The CIT(A) noted that during the search operation, no evidence of undisclosed income, except for the cash of Rs. 3,03,000/-, was found. The AO had levied the penalty under Section 271AAB(1)(a), which requires the presence of 'undisclosed income' and a 'specified previous year.' The CIT(A) highlighted that the Rs. 31,00,00,000/- was offered by the assessee suo moto without any corroborating evidence, and the Supreme Court has ruled that penalty cannot be levied solely based on an assessee’s statement without corroborating evidence. Thus, the CIT(A) directed the AO to levy the penalty only on the cash of Rs. 3,03,000/- found during the search.4. Discretionary Nature of Penalty Imposition under Section 271AAB:The CIT(A) and the tribunal both emphasized that Section 271AAB is not mandatory and gives the AO discretion to levy a penalty. This interpretation was supported by the ITAT Lucknow's decision in Sandeep Chandak vs. ACIT, which held that the use of the word 'may' in Section 271AAB indicates that the AO has the discretion to levy or not levy the penalty even if the assessee has made a default. The tribunal also referred to its coordinate bench’s decision in DCIT vs. M/s. Rashmi Metaliks Ltd., where it was held that the penalty under Section 271AAB could not be sustained if the AO did not specify under which clause the penalty was being levied and if there was no incriminating evidence found during the search.Conclusion:The tribunal upheld the CIT(A)’s decision to delete the penalty imposed on the assessee, reiterating that the penalty under Section 271AAB is discretionary and not automatic. The tribunal found no merit in the Revenue’s arguments and confirmed that the penalty could not be levied solely based on the assessee’s statement without corroborating evidence. The appeal was dismissed.