Appeal success: Interest reduced, penalty deleted under tax law sections. Seized amount adjustment crucial.

The Tribunal partially allowed the appeal regarding the interest under Section 234B and fully allowed the appeal regarding the penalty under Section 271AAB. The Tribunal found that the seized amount should have been adjusted against the tax demand, leading to the deletion of the interest charged under Section 234B. Additionally, as the income was offered for taxation before the search operation, the Tribunal deemed the penalty under Section 271AAB unjustified and directed the AO to delete the penalty.

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Issues Involved:
1. Levy of interest under Section 234B of the Income Tax Act.
2. Levy of penalty under Section 271AAB(1A) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Levy of Interest under Section 234B:

The appeals ITA No.300/Del/2022 and 2748/Del/2022 pertain to the assessment order dated 27.02.2021 and the penalty order dated 27.03.2022, respectively. The case involves a search and seizure operation conducted on 01.12.2018, where Rs. 88 lakhs were found and seized from the assessee's locker. The assessee offered this amount for taxation under Section 69A but did not show it in the return of income due to a lack of liquid funds to pay the taxes. The assessee requested the tax liability to be adjusted from the seized amount, but this was dismissed by the AO and CIT(A), leading to the completion of assessment at Rs. 90,65,830/- with the addition of Rs. 88 lakhs.

The assessee challenged the levy of interest under Section 234B, arguing that the seized amount should have been adjusted against the tax demand. The Tribunal noted that the assessee repeatedly requested the adjustment of the seized cash towards the self-assessment tax, which should have been done by the AO according to Section 132B. The Tribunal found no merit in charging interest under Section 234B and directed the AO to delete the interest charged.

2. Levy of Penalty under Section 271AAB(1A):

The second appeal ITA No.2748/Del/2022 deals with the penalty levied under Section 271AAB(1A). The search operation on 01.12.2018 led to the seizure of Rs. 88 lakhs, which was included in the assessed income of Rs. 90,65,830/-. The AO imposed a penalty of Rs. 52,80,000/- at 60% of the undisclosed income, citing the provisions of Section 271AAB(1A)(b).

The Tribunal examined the provisions of Section 271AAB and noted that the assessee had already surrendered Rs. 88 lakhs as undisclosed income in response to a summon issued under Section 131(1A) before the search. The Tribunal concluded that the income was offered for taxation before the search, and thus, it cannot be considered as found and seized as a result of the search. Consequently, the Tribunal found no merit in the levy of penalty under Section 271AAB and directed the AO to delete the penalty.

Conclusion:

The Tribunal allowed the appeal partly regarding the interest under Section 234B and fully regarding the penalty under Section 271AAB, emphasizing that the decisions were based on the peculiar facts of the case and do not set a precedent.

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