Tribunal upholds penalties for misreported income in AYs 2017-19, directs deletion for AYs 2019-21

The Tribunal upheld penalties under Section 270A for AYs 2017-18 and 2018-19, finding the assessee misreported income supported by incriminating documents. However, it directed deletion of penalties under Section 271AAB for AYs 2019-20 and 2020-21 as the due date for filing returns had not passed during the search, leading to insufficient basis for non-disclosure.

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Issues Involved:
1. Legality of penalty levied under Section 270A of the Income Tax Act for AYs 2017-18 and 2018-19.
2. Legality of penalty levied under Section 271AAB of the Income Tax Act for AYs 2019-20 and 2020-21.

Detailed Analysis:

Issue 1: Legality of Penalty under Section 270A for AYs 2017-18 and 2018-19

The assessee challenged the penalty levied under Section 270A of the Income Tax Act, stating that the penalty for underreporting of income was unjustified. The assessee argued that the rental income was estimated and not based on incriminating material found during the search. The assessee had admitted to the undisclosed rental income during the search but contended that this admission was to avoid litigation and buy peace.

The Assessing Officer (AO) initiated penalty proceedings under Section 270A, concluding that the assessee had underreported income, which attracted a 200% penalty. The AO based this on incriminating documents found during the search, which indicated undisclosed rental income. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this penalty, referencing the Supreme Court decision in MAK Data (P) Ltd. v. CIT, which emphasized that voluntary disclosure or buying peace does not negate the fact of concealment of income.

The Tribunal agreed with the AO and CIT(A), stating that the undisclosed rental income was not merely an estimation but was supported by incriminating documents found during the search. The Tribunal concluded that the assessee had misreported income, justifying the penalty under Section 270A.

Issue 2: Legality of Penalty under Section 271AAB for AYs 2019-20 and 2020-21

The assessee also contested the penalty under Section 271AAB, arguing that the penalty was not automatic and required a clear nexus with undisclosed income found during the search. The AO had levied the penalty based on the assessee's admission of undisclosed rental income during the search, which was not reported in the returns filed for the relevant assessment years. The AO imposed a 60% penalty, stating that the assessee had not paid the tax on the undisclosed income before filing the return.

The CIT(A) upheld the AO's decision, referencing the same Supreme Court decision in MAK Data (P) Ltd. v. CIT. However, the Tribunal found that the due date for filing the returns for AYs 2019-20 and 2020-21 had not expired at the time of the search. Therefore, it could not be concluded that the rental income would not have been disclosed. The Tribunal held that the AO's apprehensions were not based on facts and directed the deletion of the penalty under Section 271AAB.

Conclusion:

The Tribunal dismissed the appeals for AYs 2017-18 and 2018-19, upholding the penalties under Section 270A for misreporting of income. However, it allowed the appeals for AYs 2019-20 and 2020-21, directing the deletion of penalties under Section 271AAB, as the due date for filing returns had not expired at the time of the search.

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