2017 (2) TMI 110 - AT - Income Tax

Tribunal cancels penalty under Income Tax Act citing taxpayer cooperation and compliance

M/s. Chains Corner Jewellery (I) Pvt. Ltd. Versus The ACIT CC-22, Mumbai

The Tribunal allowed the appeal against the levy of penalty under section 271AAA of the Income Tax Act, 1961. The appellant's cooperation, admission of ... Penalty u/s. 271AAA - Held that:- We find that the assessee-company has paid taxes together with interest in respect of the undisclosed income declared in the statement recorded u/s 132(4) of the Act. As narrated in para 6.2 here-in-above, it has provided information regarding the manner in which the undisclosed income was derived. Therefore, the order of the Ld. CIT(A) upholding the penalty imposed by the AO u/s 271AAA is cancelled. - Decided in favour of assessee Issues:Levy of penalty under section 271AAA of the Income Tax Act, 1961.Analysis:1. The appeal was filed against the order of Commissioner of Income Tax (Appeals)-39, Mumbai regarding the levy of penalty under section 271AAA of the Income Tax Act, 1961. The appellant contended that the penalty should be deleted as they had admitted to the undisclosed income during the search, specified its manner, paid taxes, and cooperated fully. The appellant argued that the discretionary power under section 271AAA should not have been exercised in a routine manner.2. A search and seizure action was conducted at the assessee's business premises, leading to the discovery of undisclosed cash. The Assessing Officer (AO) found a stock deficit during assessment and imposed a penalty under section 271AAA. The appellant appealed against this penalty, arguing that the case did not automatically warrant a penalty and citing various legal precedents to support their case.3. Section 271AAA mandates a penalty of 10% of undisclosed income if specific conditions are met. The penalty can be avoided if the assessee admits the undisclosed income, specifies its manner, and pays the tax along with interest. The Supreme Court's ruling highlights that assessment findings are not conclusive for penalty proceedings.4. The main dispute centered around the substantiation of how the undisclosed income was derived. The appellant had disclosed the undisclosed income during the search and provided details on its sources. Legal precedents were cited to support the appellant's argument that the penalty should be set aside if the undisclosed income was declared and taxes were paid.5. The Tribunal noted that the appellant had paid taxes and interest on the undisclosed income, provided information on its derivation, and cooperated during the proceedings. Consequently, the penalty imposed by the AO under section 271AAA was canceled, and the appeal was allowed.This detailed analysis of the judgment covers the issues involved, the arguments presented, the legal framework under section 271AAA, and the final decision reached by the Tribunal.