2016 (5) TMI 1547 - AT - Income Tax

Tribunal upholds deletion of penalty under section 271AAA of Income-tax Act

Assistant Commissioner of Income-Tax Versus Ritu Singal

The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision to delete the penalty imposed under section 271AAA of the Income-tax Act. The ... Penalty u/s 271AAA - disclosure of undisclosed income earned during the financial year 2009-10 during the course of search and post-search proceedings on the basis of the seized material found during the course of search - CIT-A deleted the penalty - HELD THAT:- After going through the order passed by the learned Commissioner of Income-tax (Appeals) on the issue in dispute as well as the orders of the Tribunal relied upon by the learned Commissioner of Income-tax (Appeals) while deleting the penalty in dispute, we are of the view that the learned first appellate authority has passed a well reasoned order which does not need any interference on our part. Therefore, respectfully following the precedents of the Income-tax Appellate Tribunal as mentioned in the learned Commissioner of Income-tax (Appeals)'s order, we uphold the order of the learned Commissioner of Income-tax (Appeals) wherein the learned Commissioner of Income-tax (Appeals) has deleted the penalty in dispute and accordingly, we dismiss the appeal of the Revenue. Issues Involved:1. Legality and correctness of the order passed by the Commissioner of Income-tax (Appeals).2. Deletion of penalty imposed under section 271AAA of the Income-tax Act.3. Applicability and interpretation of section 271AAA of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Legality and correctness of the order passed by the Commissioner of Income-tax (Appeals):The Revenue challenged the order of the Commissioner of Income-tax (Appeals) dated July 5, 2013, on the grounds that it was incorrect in law and facts. The Commissioner had deleted the penalty imposed by the Assessing Officer under section 271AAA of the Income-tax Act amounting to Rs. 2 crores on the surrender of Rs. 20 crores. The Revenue contended that the assessee had not substantiated the manner in which the undisclosed income was derived with any corroborative evidence.2. Deletion of penalty imposed under section 271AAA of the Income-tax Act:The Assessing Officer had imposed a penalty of Rs. 2 crores under section 271AAA, arguing that the assessee failed to specify and substantiate the manner in which the undisclosed income of Rs. 20 crores was earned. The Commissioner of Income-tax (Appeals) deleted this penalty, citing various orders of the Income-tax Appellate Tribunal (ITAT) and his own previous order in a related case. The Commissioner noted that the assessee had disclosed the income during the search and paid the due taxes, and that the manner in which the income was derived was substantiated by seized documents.3. Applicability and interpretation of section 271AAA of the Income-tax Act, 1961:Section 271AAA requires the assessee to admit the undisclosed income during the search, specify the manner in which it was derived, and substantiate this manner to avoid penalty. The Tribunal examined whether the assessee had indeed fulfilled these conditions. The Tribunal found that the Commissioner of Income-tax (Appeals) had elaborately discussed the issue by considering the submissions of the assessee and the relevant legal provisions. The Tribunal noted that the assessee had disclosed the income during the search, specified that it was derived from property and forward market transactions, and substantiated this with seized documents. The Tribunal also referenced various ITAT decisions which supported the view that the manner of earning undisclosed income can be somewhat general and does not require precise calculations.Conclusion:The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), confirming that the deletion of the penalty was justified. The Tribunal found that the assessee had met the conditions of section 271AAA by disclosing the income, specifying the manner of its derivation, and substantiating it with evidence. The Tribunal dismissed the Revenue's appeal, stating that the order of the Commissioner was well-reasoned and did not require interference.Order Pronouncement:The appeal of the Revenue was dismissed, and the order was pronounced in the open court on May 4, 2016.