2019 (3) TMI 1305 - AT - Income Tax

Appeal allowed for penalty recomputation under Section 271AAA. Assessing Officer directed for proportionate unpaid tax calculation.

Avtar Singh Kochar Versus DCIT, Central Circle-25, New Delhi

Avtar Singh Kochar Versus DCIT, Central Circle-25, New Delhi - TMI Issues Involved:1. Initiation and imposition of penalty under Section 271AAA of the Income Tax Act.2. Compliance with conditions under Section 271AAA(2) for immunity from penalty.3. Calculation and payment of tax and interest on undisclosed income.4. Delay in deposit and credit of seized cash.5. Declaration of assessee as 'assessee in default.'6. Approval of penalty imposition under Section 274(2) in a mechanical manner.Detailed Analysis:1. Initiation and Imposition of Penalty under Section 271AAAThe appeal was filed against the confirmation of a penalty of INR 20,000,000 levied under Section 271AAA by the Deputy Commissioner of Income Tax and upheld by CIT(A)-29, New Delhi. The penalty was imposed due to the assessee's failure to pay the full tax and interest on undisclosed income before the due date of filing the return.2. Compliance with Conditions under Section 271AAA(2)The assessee argued that they fulfilled all conditions under Section 271AAA(2), including:- Admitting the undisclosed income during the search.- Specifying and substantiating the manner in which the income was derived.- Paying the tax and interest on the undisclosed income.However, the AO and CIT(A) held that the penalty was justified as the full tax and interest were not paid by the due date for filing the return.3. Calculation and Payment of Tax and Interest on Undisclosed IncomeThe assessee disclosed INR 200,000,000 as undisclosed income and filed the return on 20/09/2012. The AO noted that the tax on this income was not fully paid by the due date (30/09/2011). The CIT(A) confirmed the penalty, stating that the taxes were not paid along with the return, and thus, immunity from penalty could not be availed.4. Delay in Deposit and Credit of Seized CashThe assessee contended that INR 12,100,000 seized during the search was not credited as advance tax timely, leading to overcharged interest under Sections 234A, B, and C. The AO later adjusted this amount on 10/06/2013, and the assessee argued that the entire tax had been paid before the penalty was levied.5. Declaration of Assessee as 'Assessee in Default'The assessee argued that they were wrongly declared as 'assessee in default' without reasonable time to make payments, despite making voluntary payments and having no outstanding dues at the time of appeal.6. Approval of Penalty Imposition under Section 274(2)The assessee claimed that the Additional CIT approved the penalty in a mechanical manner without applying his mind, making the penalty bad in law.Tribunal's Findings:The Tribunal considered the rival contentions and noted that the assessee disclosed the income and specified the manner of earning it, satisfying the first two conditions under Section 271AAA(2). The primary issue was whether the tax and interest on the undisclosed income were paid timely.The Tribunal referred to the Delhi High Court's decision in PCIT v. Ritu Singhal, which held that the outer time limit for payment of tax is not necessarily before the due date of filing the return but can extend to the assessment stage. The Tribunal found that the assessee paid the tax before the assessment was made, thus satisfying the third condition for immunity from penalty.However, the Tribunal observed that it was unclear what amount of tax was paid before the assessment order under Section 143(3). Therefore, the Tribunal set aside the issue to the AO to recompute the penalty proportionate to the unpaid tax and interest up to the date of assessment.Conclusion:The appeal was allowed for statistical purposes, and the AO was directed to recompute the penalty under Section 271AAA based on the proportionate unpaid tax and interest up to the date of assessment. The order of the lower authorities was reversed accordingly.