2018 (10) TMI 293 - AT - Income Tax

Tax Tribunal Upholds Deletion of Penalties under Income Tax Act

Deputy Commissioner of Income- tax Versus M/s Shree Krishna Developers, Shri Mahendrabhai J. Shah “Gokul”

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision to delete penalties imposed by the Assessing Officer under Section 271AAA of the ... Penalty u/s 271AAA - absence of any specific inquiry - manner of earning undisclosed income and substantiation thereof - Held that:- In the absence of any evidence on record to show that any specific query was made to the assessee in this regard, the allegation for non-fulfillment of condition of Section 271AAA(2) of the Act does not survive. In view of the binding precedent, the onus would shift on the assessee to specify the manner of earning undisclosed income and substantiation thereof only upon requisite inquiry in this regard. In the absence of any specific inquiry, the assessee cannot be blamed for non-furnishing of manner of earning undisclosed income and substantiation thereof sue motu. It was not shown to us as to whether such query was put even in the course of assessment proceedings. In the absence of any inquiry, the assessee cannot be blamed for non-satisfaction of the exit clause provided under s.271AAA(2) of the Act. Therefore, in the facts and circumstances of the case, the immunity provided under erstwhile provisions of Section 271AAA(1) of the Act cannot be denied. - Decided against revenue Issues:1. Imposition of penalty under Section 271AAA of the Income Tax Act, 1961.2. Compliance with conditions for exoneration of penalty.3. Judicial interpretation of Section 271AAA(2) requirements.4. Applicability of precedents in penalty imposition cases.Issue 1: Imposition of penalty under Section 271AAA of the Income Tax Act, 1961:The appeals were filed by the Revenue against the orders of the Commissioner of Income Tax (Appeals) concerning penalty orders dated 21.08.2014 & 16.07.2014 passed by the Assessing Officer under Section 271AAA of the Income Tax Act, 1961 for assessment year 2012-13. The Revenue challenged the deletion of penalties imposed on the undisclosed income of the specified previous year.Issue 2: Compliance with conditions for exoneration of penalty:During a search operation, the assessee disclosed unaccounted receipts derived from land trading and commission income. The assessee admitted and offered the undisclosed income, paid taxes, and the assessment order was passed accepting the disclosure. The penalty was imposed under Section 271AAA of the Act for non-compliance with conditions specified for exoneration of penalty leviable. The CIT(A) found merit in the non-imposition of penalty, stating that the assessee had made effective and sufficient compliance to the immunity conditions of Section 271AAA(2)(ii) of the Act.Issue 3: Judicial interpretation of Section 271AAA(2) requirements:The controversy revolved around whether the assessee fulfilled the conditions for exclusion from penalty under Section 271AAA of the Act. The AO alleged that the assessee failed to specify the manner in which the undisclosed income was derived and substantiated, as required by Section 271AAA(2). However, the CIT(A) and the Tribunal found in favor of the assessee, citing judicial precedents that the onus to specify the manner and substantiation of undisclosed income arises only upon specific inquiry by the Revenue. In the absence of such inquiry, the immunity under Section 271AAA(1) cannot be denied.Issue 4: Applicability of precedents in penalty imposition cases:The Tribunal upheld the CIT(A)'s decision to delete the penalties imposed by the AO, stating that the facts and circumstances were similar to other cases within the same group. The Tribunal referred to previous decisions by the Hon'ble Gujarat High Court and co-ordinate benches to support the conclusion that in the absence of specific queries or inquiries by the Revenue, the assessee cannot be penalized for non-fulfillment of conditions under Section 271AAA(2) of the Act. The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s orders in both cases.