2018 (3) TMI 943 - AT - Income Tax

Revenue appeals dismissed, penalty under section 271AAB not applicable. Tribunal upholds Commissioner's decision.

DCIT, CC-2 (2), Kolkata Versus Amit Agarwal, Madan Lal Beswal, Manoj Beswal

DCIT, CC-2 (2), Kolkata Versus Amit Agarwal, Madan Lal Beswal, Manoj Beswal - TMI Issues Involved:1. Legitimacy of the penalty imposed under section 271AAB of the Income-tax Act, 1961.2. Interpretation of the term 'undisclosed income' under section 271AAB.3. Applicability of penalty provisions under section 271AAB for the income declared during the search operation.Detailed Analysis:Issue 1: Legitimacy of the Penalty Imposed Under Section 271AABThe revenue filed appeals against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)]-20, Kolkata, which deleted the penalty imposed under section 271AAB of the Income-tax Act, 1961. The penalty was related to an undisclosed income of Rs. 3,00,00,000/- admitted during a search operation on the Nezone Group. The Assessing Officer (AO) imposed the penalty on the ground that this income was not recorded in the regular books of accounts. However, the CIT(A) deleted the penalty, stating that the non-recording of income was a bona fide mistake by the accountant and did not indicate any intention to conceal income.Issue 2: Interpretation of the Term 'Undisclosed Income' Under Section 271AABThe CIT(A) observed that the income in question was found recorded on papers and related documents in the office premises of the assessee, albeit not in the regular books of accounts. The CIT(A) concluded that the mere non-recording of income in the regular books did not prove the intention to conceal income, especially since the income was kept in safe custody in the office premises. This interpretation was crucial in determining whether the income could be classified as 'undisclosed income' under section 271AAB.Issue 3: Applicability of Penalty Provisions Under Section 271AAB for the Income Declared During the Search OperationThe Income Tax Appellate Tribunal (ITAT) noted that the issue was covered in favor of the assessee in a similar case involving another member of the Nezone Group, where the Tribunal had held that the provisions of section 271AAB are not mandatory and are discretionary. The Tribunal emphasized that the word 'may' in section 271AAB indicates discretion, not compulsion, in imposing penalties. The Tribunal also observed that the income from speculative trading was declared under the head 'Income from Other Sources' and not 'Business or Profession,' and hence, the assessee was not required to maintain books of accounts under section 44AA.Additional Observations:1. The Tribunal noted that the AO had accepted the returned income comprising salary and income from other sources without contesting the assessee's classification of the income.2. The Tribunal highlighted that the income was recorded in 'other documents' maintained in the normal course, which were retrieved during the search, and thus, the income could not be termed as 'undisclosed income' under section 271AAB.3. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order that no penalty could be levied as the income did not fall within the definition of 'undisclosed income' under section 271AAB.Conclusion:The appeals filed by the revenue were dismissed, and the orders of the CIT(A) deleting the penalty under section 271AAB were upheld. The Tribunal concluded that the penalty provisions under section 271AAB are discretionary and not mandatory, and the income in question did not qualify as 'undisclosed income' as per the statutory definition. The Tribunal's decision was based on the interpretation of legal provisions and the specific facts of the case, including the nature of the income and the manner of its recording.