2024 (8) TMI 1007 - AT - Income Tax

Penalty under Section 271AAB upheld for service tax refund additions despite assessee's admission arguments

ITAT Chennai upheld penalty under Section 271AAB against assessee for service tax refund additions. Tribunal ruled that assessee's case fell under Clause ... Penalty u/s. 271AAB - additions on account of service tax refund - HELD THAT:- The assessee’s case, in our considered opinion, would squarely fall within Clause (c) of Sec.271AAB(1) since the admission made by the assessee was not honored in the return of income and clause (a) and (b) would have no application in such a case. The only clause which would apply to the assessee’s case would be clause (c) which has correctly been invoked by Ld. AO in the present case. We also concur with the submissions of Ld. Sr. DR that adequate opportunity of hearing was given to the assessee to assail the penalty. The same is as per the provisions of Sec. 274(1) of the Act. Whether the same was through statutory notice or a non-statutory notice would be immaterial. The only requirement is that opportunity of hearing should be given specifically mentioning the ground which the assessee has to meet. The same has been done in the present case. The various case laws as referred to by Ld. AR would have no application to the facts of the present case since the limb which would apply to assessee’s case has clearly been spelt by Ld. AO in the penalty order. No other limb could have been invoked against the assessee. The arguments of Ld. AR, in this regard, stand rejected. In the present case, the limb was clearly spelt out and the assessee could not offer any explanation against the impugned addition. The assessee never raised any grievance against notices of penalty before lower authorities and merely pleaded to keep the proceedings in abeyance till the disposal of quantum appeals by Hon’ble High Court of Madras. Penalty order is barred by limitation u/s 275(1) - The extant statutory provision provides that in case the assessment order is subject matter of appeal before appropriate authorities including Tribunal, no order shall be passed after the expiry of financial year in which the relevant proceedings in which penalty is initiated are completed or within one year from the end of the month in which the appellate order is received, whichever is later. In the present case Tribunal has passed order in quantum appeal on 27-09-2019. Considering the same, penalty order has been passed by Ld. AO on 23-03-2020. Therefore, the penalty order is well within the prescribed time limits. The arguments of Ld. AR, in this regard, stand rejected. Violation of principle of natural justice - The facts on record do not show any such violation. Adequate opportunity of hearing has already been afforded to the assessee. Ground No.3 & 4 stand dismissed since the income surrendered but not admitted would fall under the purview of undisclosed income - Assessee appeal dismissed. Issues Involved:1. Confirmation of penalty u/s 271AAB.2. Alleged violation of principles of equity and natural justice.3. Applicability of undisclosed income definition under section 271AAB.4. Discretionary nature of penalty under section 271AAB.5. Defective show-cause notice under section 271AAB(1).6. Debatable issue in quantum appeal admitted by Hon'ble High Court.7. Limitation period for passing the penalty order.Issue-wise Detailed Analysis:1. Confirmation of Penalty u/s 271AAB:The assessee appealed against a penalty of Rs. 82.56 Lacs levied u/s 271AAB for AY 2015-16. The Ld. AO initiated penalty proceedings based on additions of Rs. 80.83 Crores in the assessment order, later reduced to Rs. 275.21 Lacs by the Tribunal. The assessee argued there was no undisclosed income, but the Ld. AO held that the assessee failed to furnish details of returned or unsold paper lottery tickets and prize-winning money recipients. The penalty was levied at 30% of Rs. 275.21 Lacs.2. Alleged Violation of Principles of Equity and Natural Justice:The assessee contended that the CIT(A) completed proceedings arbitrarily without considering submissions and failed to provide a sufficient opportunity of being heard. The Tribunal found that adequate opportunity was given to the assessee, and the penalty order was based on the findings in the quantum appeal.3. Applicability of Undisclosed Income Definition under Section 271AAB:The assessee argued that the assessed income did not fall within the definition of undisclosed income under section 271AAB. The Tribunal noted that the additional income was surrendered during the search but not fully disclosed in the return. The differential amount added by the AO was considered undisclosed income under Sec. 271AAB.4. Discretionary Nature of Penalty under Section 271AAB:The assessee claimed that the penalty under section 271AAB is discretionary and was imposed arbitrarily. The Tribunal held that the specific limb of Sec. 271AAB was applicable, and the penalty was mandatory.5. Defective Show-Cause Notice under Section 271AAB(1):The assessee argued that the show-cause notice was defective and did not specify the limb under which the penalty was being imposed. The Tribunal found that the specific limb (Clause (c)) was clearly mentioned in the penalty order, and adequate opportunity of hearing was given.6. Debatable Issue in Quantum Appeal Admitted by Hon'ble High Court:The assessee contended that the quantum appeal admitted by the Hon'ble High Court indicated a debatable issue, and no penalty should be imposed on debatable issues. The Tribunal distinguished the case law cited by the assessee and found that the specific limb applicable to the assessee's case was clearly spelt out.7. Limitation Period for Passing the Penalty Order:The assessee argued that the penalty order was barred by limitation under section 275(1). The Tribunal noted that the penalty order was passed within the prescribed time limits, considering the Tribunal's quantum appeal order dated 27-09-2019 and the penalty order dated 23-03-2020.Conclusion:The Tribunal dismissed the appeal, finding no reason to interfere with the lower authorities' orders. The penalty order was confirmed, and the appeal was dismissed.