Tribunal upholds deletion of penalty under section 271AAA for multiple assessment years

The Asst. Commissioner of Income Tax, Central Circle, Kolhapur Versus D.M. Corporation Pvt. Ltd.

The Asst. Commissioner of Income Tax, Central Circle, Kolhapur Versus D.M. Corporation Pvt. Ltd. - TMI Issues Involved:
1. Deletion of penalty under section 271AAA of the Income-tax Act, 1961.
2. Non-initiation of penalty under section 271(1)(c) of the Income-tax Act, 1961.
3. Exercise of coterminous powers by CIT(A) with the Assessing Officer.
4. Applicability of section 271AAA to assessment years preceding the year of search.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271AAA:
The Revenue appealed against the CIT(A)'s order which deleted the penalty levied under section 271AAA of the Income-tax Act, 1961. The CIT(A) had deleted the penalty on the grounds that the assessee's total income had been reduced to the returned income after the CIT(A)'s order in the quantum proceedings, and taxes had been paid accordingly. Therefore, the assessee was entitled to immunity from penalty under section 271AAA.

2. Non-initiation of Penalty under Section 271(1)(c):
The Revenue contended that the CIT(A) failed to initiate penalty under section 271(1)(c) for concealment of income. However, the Tribunal noted that sub-section (3) to section 271AAA clearly states that no penalty under section 271(1)(c) shall be imposed in respect of undisclosed income referred to in sub-section (1) of section 271AAA. The Tribunal held that the Assessing Officer must record clear satisfaction regarding which section is applicable before initiating penalty proceedings. Since the AO had already initiated penalty under section 271AAA, initiating penalty under section 271(1)(c) was precluded by the provisions of the Act.

3. Exercise of Coterminous Powers by CIT(A):
The Revenue argued that the CIT(A) should have exercised his coterminous powers with the Assessing Officer to impose the correct penalty. The Tribunal found no merit in this argument, stating that the CIT(A) had rightly deleted the penalty under section 271AAA, and there was no basis for initiating penalty under section 271(1)(c) as the provisions of section 271AAA precluded such action.

4. Applicability of Section 271AAA to Assessment Years Preceding the Year of Search:
The Tribunal analyzed the provisions of section 271AAA, which allows the Assessing Officer to impose a penalty on 'undisclosed income' of the 'specified previous year.' The term 'specified previous year' is defined in clause (b) of the Explanation to section 271AAA. The Tribunal concluded that penalty under section 271AAA could only be levied for the 'specified previous year,' which includes the year of search and the previous year for which the return filing date under section 139(1) had not expired by the date of search. Since the assessment years in question (2006-07 to 2010-11) did not fall within the definition of 'specified previous year,' the penalty under section 271AAA was not applicable.

Conclusion:
The Tribunal upheld the CIT(A)'s order deleting the penalty under section 271AAA for the assessment years 2006-07 to 2010-11. It also dismissed the Revenue's grounds for initiating penalty under section 271(1)(c), stating that the AO must record clear satisfaction before levying penalties and that the provisions of section 271AAA preclude the imposition of penalty under section 271(1)(c) for the same undisclosed income. The Tribunal's decision applied mutatis mutandis to all related appeals, resulting in the dismissal of all the Revenue's appeals.