Appeal dismissed for penalty deletion under Income Tax Act; lack of evidence and invalid penalty order cited.

The appeal challenging the deletion of a penalty under Section 271AAB of the Income Tax Act was dismissed. The Commissioner of Income Tax (Appeals) upheld the deletion of the penalty, stating that the assessing officer failed to specify how the additional income was detected during the search and did not provide evidence of undisclosed income. The penalty order was found invalid for not specifying the default committed to attract the penalty. The disclosure of income was deemed voluntary, and the show cause notice was considered invalid for not specifying the grounds for the proposed penalty.

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Issues Involved:
1. Deletion of penalty levied under Section 271AAB of the Income Tax Act, 1961.
2. Validity of penalty order under Section 271AAB without specifying the limbs of Section 271AAB(1A).
3. Whether the disclosure of income was voluntary or a result of search action.
4. Validity of show cause notice issued under Section 274 read with Section 271AAB.

Summary:

Issue 1: Deletion of Penalty Levied under Section 271AAB of the Income Tax Act, 1961
The revenue's appeal challenged the deletion of a penalty amounting to Rs. 2,19,00,000/- levied under Section 271AAB of the Income Tax Act. The assessee argued that the penalty was wrong, bad in law, invalid, and void-ab-initio. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, noting that the assessing officer (AO) failed to specify how the additional income was detected during the search proceedings and did not provide any document or evidence indicating undisclosed income. The AO's failure to bring on record any material found during the search led to the conclusion that the penalty could not be sustained.

Issue 2: Validity of Penalty Order under Section 271AAB Without Specifying the Limbs of Section 271AAB(1A)
The assessee contended that the penalty order was invalid as the AO initiated the penalty under Section 271AAB in the assessment order without specifying the limbs of Section 271AAB(1A). The CIT(A) found this argument convincing, noting that the AO did not specify the default committed by the assessee to attract the penalty. The AO's failure to specify the undisclosed income in both the assessment and penalty orders rendered the penalty unsustainable.

Issue 3: Whether the Disclosure of Income was Voluntary or a Result of Search Action
The AO argued that the disclosure of additional income was not voluntary and was a result of the search action. However, the CIT(A) observed that the AO did not provide any evidence or document indicating that the income disclosed was not voluntary. The CIT(A) concluded that the income disclosed by the assessee did not fall within the definition of undisclosed income under Section 271AAB, as there was no corroborated evidence of assets or valuable articles not recorded in the books of account.

Issue 4: Validity of Show Cause Notice Issued under Section 274 Read with Section 271AAB
The assessee argued that the show cause notice issued under Section 274 read with Section 271AAB was invalid as it did not specify the grounds and default for which the penalty was proposed. The CIT(A) agreed, noting that the AO did not specify the default and charge against the assessee, which necessitated the levy of penalty. The CIT(A) cited various case laws, including decisions from the Jaipur Bench of the Tribunal, which held that a show cause notice without specifying the default and ground for penalty renders the initiation of penalty proceedings invalid.

Conclusion:
The appeal filed by the revenue was dismissed, and the cross-objection filed by the assessee was also dismissed. The CIT(A)'s decision to delete the penalty levied under Section 271AAB was upheld, as the AO failed to specify the default and charge against the assessee, and there was no evidence indicating that the income disclosed was not voluntary.

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