2023 (9) TMI 1160 - AT - Income Tax

Tribunal cancels Rs. 60 lakh penalty under Income Tax Act citing lack of incriminating evidence

Asst. Commissioner of Income Tax, Central Circle-1 (2), Hyderabad Versus Sri Mahender Kumar Agarwal, Hyderabad

Asst. Commissioner of Income Tax, Central Circle-1 (2), Hyderabad Versus Sri Mahender Kumar Agarwal, Hyderabad - TMI Issues Involved:1. Legitimacy of penalty proceedings under section 271AAB of the Income Tax Act.2. Definition and applicability of 'undisclosed income' under section 271AAB.3. Evidentiary value of statements made under section 132(4) of the Act without supporting incriminating material.Summary:Legitimacy of Penalty Proceedings under Section 271AAB:The Revenue appealed against the order of the CIT(A) which deleted the penalty of Rs. 60 lakhs levied under section 271AAB of the Income Tax Act. The assessee argued that no incriminating material was found during the search, and the additional income was admitted merely to buy peace and avoid litigation. The CIT(A) concluded that the Assessing Officer did not identify any discrepancies or seized material indicating concealment of income, and thus, the penalty could not be sustained.Definition and Applicability of 'Undisclosed Income' under Section 271AAB:The CIT(A) found that the undisclosed income admitted by the assessee did not fall within the categories defined under clause (c) of the explanation to section 271AAB. The assessee had not recorded the undisclosed income in its books, nor was it corroborated by any incriminating material or false expenditure claims. The CIT(A) held that the penalty was levied merely based on the assessee's admission without any supporting discrepancies or incriminating material.Evidentiary Value of Statements under Section 132(4) Without Supporting Incriminating Material:The Tribunal noted that the Assessing Officer did not refer to any incriminating document to justify the addition of Rs. 1 crore. The Tribunal referenced several cases, including PCIT vs. Shri Ramdass Motor Transport and Padam Chand Pungliya vs. ACIT, to emphasize that mere disclosure of income under section 132(4) without supporting incriminating material does not suffice to levy a penalty under section 271AAB. The Tribunal concluded that the penalty under section 271AAB is not mandatory and requires a thorough examination of the facts and circumstances of the case.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the penalty, concluding that the additional income disclosed by the assessee did not meet the definition of 'undisclosed income' under section 271AAB. The appeal of the Revenue was dismissed.