ITAT overturns penalty under section 271AAA for undisclosed income

The ITAT allowed the appeal of the assessee, setting aside the penalty imposed under section 271AAA of the Income Tax Act, 1961. The appellant, a Director in a group with undisclosed cash seized during a search, added the amount to income in the return filed. The ITAT determined that the conditions of section 271AAA were not met as the amount was added to income without further inquiry by the AO. Previous judgments supported the appellant's position, leading to the revocation of the penalty.

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Issues:
Imposition of penalty under section 271AAA of the Income Tax Act, 1961.

Analysis:
The case involved an appeal against the imposition of a penalty amounting to Rs. 1,75,000 under section 271AAA of the Income Tax Act, 1961. The appellant, a Director in a group engaged in various businesses, had undisclosed cash of Rs. 17,50,000 seized during a search and seizure action. The appellant added this amount to his income from other sources in the return filed. The Assessing Officer (AO) initiated penalty proceedings under section 271AAA, and the penalty was imposed. The appellant challenged this penalty before the ITAT, arguing that the penalty was not justified as the appellant fulfilled the conditions under section 271AAA(2).

The Authorized Representative for the appellant contended that the AO's allegation that the source of the undisclosed income was not specified was incorrect, as no query was raised during the statement recording under section 132(4) of the Act. The representative argued that the surrender of the amount was not made during the search but was added to the income in the return filed, which was accepted by the AO without further additions. The representative relied on a judgment of the Delhi High Court to support the argument that the penalty was not imposable in this case.

The Senior Departmental Representative, on the other hand, referred to a different judgment of the Delhi High Court to argue that merely stating the surrendered sum as undisclosed income without disclosing the source does not satisfy the conditions under section 271AAA. The representative asserted that the penalty was rightly imposed and should be upheld.

After considering the submissions and examining the statement recorded during the search, the ITAT found that the appellant did not surrender the seized amount during the search but added it to the income in the return, which was accepted without further inquiry by the AO. The ITAT concluded that in this case, the conditions of section 271AAA were not met, and previous judgments supported the appellant's position. Citing a coordinate Bench's decision, the ITAT ruled in favor of the appellant, setting aside the penalty and directing the AO to delete it.

In conclusion, the ITAT allowed the appeal of the assessee, and the penalty under section 271AAA was revoked.

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