Penalty under Section 271AAB deleted where assessee disclosed LTCG and cash transactions during search proceedings

The ITAT Delhi held that penalty under Section 271AAB was not justified where the assessee had disclosed LTCG and cash transactions in the return of income filed during search proceedings under Section 132. The tribunal found no admission of undisclosed income recorded under Section 132(4), which is essential for imposing penalty under Section 271AAB(1A). The disclosed income did not fall within the definition of undisclosed income as the transactions were conducted through banking channels, advance tax was paid, and the income was otherwise taxable. The penalty was deleted following precedent from a coordinate bench decision.

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Issues:
1. Imposition of penalty under Section 271AAB of the Income-tax Act concerning Assessment Year 2021-22.
2. Whether the penalty imposed by the Assessing Officer was justified.
3. Appeal against the relief granted by the CIT(A) deleting the penalty.
4. Comparison with a similar case involving the wife of the assessee.
5. Interpretation of undisclosed income and its applicability in the case.

Analysis:

Issue 1: Imposition of penalty under Section 271AAB
The appeal arose from the First Appellate order concerning the penalty order dated 26.09.2022 under section 271AAB of the Income-tax Act for Assessment Year 2021-22. The Assessing Officer invoked penalty proceedings under Section 271AAB and imposed a penalty of 30% on the undisclosed income of the assessee.

Issue 2: Justification of Penalty
The CIT(A) found that the ingredients of Section 271AAB were not fulfilled, leading to the deletion of the penalty. The CIT(A) noted that the appellant had declared the additional income in the return of income without any incriminating material found during the search. The CIT(A) held that the disclosed income could not be treated as undisclosed income under the Act.

Issue 3: Appeal Against Relief Granted
The Revenue appealed the relief granted by the CIT(A), challenging the deletion of the penalty under Section 271AAB. The Revenue contended that the assessee would not have disclosed the income if the search had not taken place, arguing against the CIT(A)'s decision.

Issue 4: Comparison with Similar Case
The assessee's counsel referred to a case involving the wife of the assessee, where a similar penalty was imposed and later deleted by the Tribunal. The counsel argued that the identical factual situation had already been examined by the Tribunal, supporting the assessee's case.

Issue 5: Interpretation of Undisclosed Income
The Tribunal analyzed the definition of undisclosed income under Section 271AAB, emphasizing the lack of seized material or false entries in the books of account. The Tribunal concluded that the disclosed income, including LTCG and cash transactions, did not meet the criteria of undisclosed income, as defined in the Act.

In conclusion, the Tribunal dismissed the Revenue's appeal, citing that the prerequisites of Section 271AAB were not satisfied in the case. The Tribunal highlighted the absence of admission of undisclosed income during the search and the lawful declaration of income by the assessee. The decision was supported by a similar case involving the wife of the assessee, where the penalty was also deleted. The Tribunal upheld the CIT(A)'s decision, emphasizing the statutory discretion of the Assessing Officer in imposing penalties under Section 271AAB.

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