2022 (9) TMI 336 - AT - Income Tax

Tribunal Upholds Penalty Deletion, Emphasizes Search Requirement for Section 271AAB

The Tribunal upheld the deletion of the penalty under section 271AAB, emphasizing the necessity of a search for penalty invocation. It differentiated ... Penalty levied u/s 271AAB - whether no search was initiated in its case? - notice u/s 153C was issued on incriminating material belonging to the assessee was found - assessee pleaded that Section 271AAB is not applicable as no search was initiated in its case - CIT-A deleting the penalty levied - HELD THAT:- On due consideration of the facts and circumstances, we do not find any merit in this appeal because the opening line of section 271AAB contemplates that there should be a search for invoking this provision. As during the course of search, if any incriminating material belonging to some other person than the searched person was found, then AO of the searched person would record his satisfaction demonstrating the fact that material belonging to other person was found and it exhibits the escapement of some income from taxation. This satisfaction note is to be transmitted to the Ld. Assessing Officer, who is having jurisdiction on such other person and the AO of other person would issue notice under section 153C. Therefore, sections 153A and 153C deal with two different categories of assessees. The penalty leviable under section 271AAB is with respect to those assessees where search has been conducted. The case of the present assessee falls under second category. The assessment was made under section 153C of the Income Tax Act. We fail to understand from where the Ld. Assessing Officer has brought this statement of disclosure. Statement under section 132(4) is to be recorded during the course of search to find out, whether any declaration is to be made by an assessee or not. The next fatuous attempt at the end of Ld. Assessing Officer is that taxable income determined by him in the assessment order which is almost equivalent to the returned income disclosed by the assessee. The penalty is to be computed by taking cognizance of the assessed income. Here AO has imposed a penalty without making any reference to the income determined in the hands of assessee, rather taking cognizance of the statement of searched person, who might have disclosed it. It is totally against the law and the Ld. 1st Appellate Authority has rightly appreciated the facts and circumstances by deleting the penalty - Revenue appeal dismissed. Issues:- Appeal against deletion of penalty under section 271AAB of the Income Tax Act, 1961.Detailed Analysis:1. Background: The appeal was filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-21, Kolkata for the assessment year 2015-16. The Revenue contested the deletion of the penalty imposed under section 271AAB of the Income Tax Act, 1961.2. Factual Overview: The assessee belonged to 'THE HIND ENERGY GROUP OF COMPANIES,' and a search was conducted under section 132(1) of the Income Tax Act, leading to the discovery of incriminating material. Subsequently, a notice under section 153C was issued to the assessee, who filed the return of income declaring total income at Rs. 1,25,82,290/-.3. Penalty Proceedings: The Ld. Assessing Officer initiated penalty proceedings under section 271AAB, contending that a disclosure under section 132(4) in the Group Company warranted the penalty. The assessee argued that section 271AAB was inapplicable as no search was conducted in its case, but the penalty of Rs. 1,98,31,170/- was imposed by the Ld. Assessing Officer.4. Appellate Proceedings: The assessee appealed the penalty order, and the Ld. CIT (Appeals) deleted the penalty, emphasizing that section 271AAB applies only when a search is conducted on the premises of the assessee. The assessments were made under section 153C, not 153A, as clarified by the Ld. 1st Appellate Authority.5. Tribunal's Decision: The Tribunal examined the relevant provision of section 271AAB, which mandates the initiation of a search for penalty invocation. It differentiated between sections 153A and 153C, highlighting that the penalty under section 271AAB is applicable only when a search is conducted. The Tribunal criticized the Ld. Assessing Officer for imposing a penalty without considering the assessed income of the assessee, relying instead on the statement of a searched person. Consequently, the Tribunal upheld the deletion of the penalty by the Ld. CIT (Appeals).6. Adjournment Rejection: The Tribunal refused an adjournment requested by the assessee, noting the repeated adjournments sought without valid reasons, and proceeded to hear the appeal with the assistance of the Ld. D.R.7. Final Decision: After due consideration, the Tribunal found no merit in the Revenue's appeal as section 271AAB necessitates a search for its application. The penalty was unjustly imposed without regard to the assessed income of the assessee. Therefore, the Tribunal dismissed the appeal of the Revenue.In conclusion, the Tribunal upheld the deletion of the penalty under section 271AAB, emphasizing the requirement of a search for invoking the penalty provision. The decision highlighted the importance of assessing income correctly and following the procedural requirements laid down in the Income Tax Act.