2015 (12) TMI 1821 - AT - Income Tax

Tribunal dismisses Revenue's penalty appeal under Income Tax Act; ruling clarifies section 271AAA applicability

The Tribunal upheld the decision of the CIT (A) and dismissed the appeal by the Revenue regarding the levyability of penalty under section 271AAA of the ... Penalty u/s 271AAA - present assessee covered u/s 132 OR 133A - HELD THAT:- There is no dispute on the fact that the assessee offered the disclosed income and paid taxes. That issue on quantum reached the finality. When comes to the penalty proceedings, the AO erroneously initiated the penalty proceedings u/s 271AAA of the Act when the present assessee is not covered u/s 132 of the Act. He is covered only u/s 133A of the Act. Section 271AAA is not relevant for initiating such proceedings legally. Further, on perusal of the order of the CIT (A), we find paras 6.1 to 6.3 are relevant in this regard. CIT (A) has rightly adjudicated the issue as per the provisions of the Act and in accordance with law. Therefore, in our view, the decision taken by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by the Revenue are dismissed. Issues:Levyability of penalty u/s 271AAA of the Act without a warrant in the name of the assessee initiating search and assessments made u/s 153C of the Act.Analysis:The appeal before the Appellate Tribunal ITAT Mumbai concerned the levyability of penalty under section 271AAA of the Income Tax Act, where there was no warrant in the name of the assessee initiating search and assessments were conducted under section 153C of the Act. The case involved a search action in the case of two individuals, followed by a survey under section 133A of the Act at the premises of the assessee, who is a proprietor of a proprietary concern. The assessments in the case of the assessee were completed under section 153C of the Act. The core issue revolved around whether the penalty under section 271AAA of the Act could be imposed in such circumstances.The Counsel for the assessee argued that the penalty proceedings under section 271AAA of the Act and the subsequent levy of penalty were legally unsustainable. The Counsel highlighted the language of section 271AAA, emphasizing that it applies in cases where a search has been initiated under section 132 of the Act. The Revenue, represented by the DR, contended that the penalty was justified as the assessee had complied with the declaration made under section 132(4) of the Act and paid taxes accordingly.Upon considering the arguments and examining the relevant provisions of the Act, the Tribunal observed that the assessee had disclosed income and paid taxes, which had been finalized. However, the Tribunal noted that the penalty proceedings were erroneously initiated under section 271AAA of the Act, as the assessee was not covered under section 132 but under section 133A of the Act. The Tribunal referred to the order of the CIT (A) and highlighted that section 271AAA could only be invoked for assesses searched under section 132 of the Act, not under section 133A. The CIT (A) had deleted the penalty levied under section 271AAA, stating that it should have been initiated under section 271(1)(c) of the Act.Ultimately, the Tribunal upheld the decision of the CIT (A), stating that it was in accordance with the provisions of the Act and the law. The Tribunal found the CIT (A)'s decision fair and reasonable, leading to the dismissal of the appeal by the Revenue. The order was pronounced in open court on 16th December 2015.