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of <h1>Tribunal reduces penalty for timely tax disclosure</h1> <h3> M/s Palace Jewellers Pvt Ltd. Versus The DCIT, Central Circle-III, Ludhiana</h3> M/s Palace Jewellers Pvt Ltd. Versus The DCIT, Central Circle-III, Ludhiana - TMI Issues:Levy of penalty under section 271AAB of the Income Tax Act on the assessee for undisclosed income surrendered during a search action.Detailed Analysis:1. Background of the Issue:The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) confirming the penalty levied by the Assessing Officer under section 271AAB of the Income Tax Act. The assessee had surrendered an amount of Rs. 4 crores during a search action under section 132 of the Act due to discrepancies in accounts and unrecorded business transactions.2. Assessee's Contentions:The assessee argued that the surrendered income was to address discrepancies and was duly declared in the original return of income. The assessee requested the tax liability to be adjusted from seized assets as it lacked funds initially. The revised return was filed within the specified time, and taxes were paid. The assessee contended that the penalty should be levied at 10% of the undisclosed income under section 271AAB(1) instead of 30% under section 271AAB(3).3. Revenue's Stand:The Revenue relied on the findings of the lower authorities supporting the penalty levied under section 271AAB(3) at 30%.4. Tribunal's Decision:The Tribunal analyzed the case and noted that the surrendered income was related to unrecorded business income and discrepancies. The provisions of section 271AAB were examined, which specify penalties based on the manner of disclosure and payment of taxes. The Tribunal found the case to fall under section 271AAB(1) rather than section 271AAB(3) and imposed a penalty of 10% of the undisclosed income. The Tribunal held that the assessee had complied with the requirements of the Act regarding disclosure and payment of taxes.5. Conclusion:The Tribunal partially allowed the appeal, ruling in favor of the assessee and reducing the penalty to 10% of the undisclosed income. The judgment clarified the application of section 271AAB and emphasized the importance of timely disclosure and payment of taxes to avoid higher penalties.
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