2025 (2) TMI 917 - AT - Income Tax

Penalty under Section 271AAB cancelled where assessee voluntarily disclosed income unrelated to search findings

Poonam Mohta Versus ACIT, C.C. -1 (1), Kolkata

Poonam Mohta Versus ACIT, C.C. -1 (1), Kolkata - TMI The appeal before the Appellate Tribunal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2015-16, which pertained to a penalty imposed under section 271AAB of the Income Tax Act, 1961. The appeal was initially considered to be barred by limitation due to a delay of 52 days in filing, but the Tribunal accepted the application for condonation of delay based on the reasons provided by the assessee.The core issue raised in the appeal was the imposition of a penalty of Rs. 5,00,000 under section 271AAB of the Act. The assessee contended that the penalty was not justified as the voluntary disclosure made did not fall within the scope of section 271AAB. The argument was supported by citing the absence of incriminating material and defects in the notice issued. The assessee relied on previous decisions to support the claim that the penalty was not applicable in this case.The Tribunal analyzed the definition of 'undisclosed income' as per the explanation to section 271AAB of the Act, which includes income not recorded before the date of search or not disclosed to the tax authorities. The assessee emphasized that the disclosed income was not represented by any specific assets or entries found during a search. The Tribunal considered the submissions and held that since no incriminating material was found related to the disclosed income, and the disclosure was voluntary and not linked to the search findings, the penalty under section 271AAB was not applicable. The Tribunal also noted that the assessing officer did not establish a connection between the disclosed income and the seized documents. Consequently, the penalty of Rs. 50,00,000 was cancelled, and the appeal was allowed.In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the disclosed income did not meet the criteria of undisclosed income under section 271AAB. The decision was based on the lack of incriminating material and the voluntary nature of the disclosure, leading to the cancellation of the penalty. The appeal was allowed, and the order was pronounced on 20th February 2025.