TaxTMI 
TaxTMI 
2025 (10) TMI 1216
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....ircumstances of the case, learned A.O. was not justified in levying penalty u/s 271AAB of I.T. Act, 1961 in as much as it is not specified previous year. 2. The Appellant craves the leave to take Additional Grounds and/or amend the above grounds of appeal at the time of hearing of Appeal." ITA No. 257/GTY/2024: "1. For that under the facts & circumstances of the case, learned A.O. was not justified in levying penalty u/s 271AAB of I.T. Act, 1961. 2. The Appellant craves the leave to take Additional Grounds and/or amend the above grounds of appeal at the time of hearing of Appeal." 3. We shall first take up the appeal for A.Y. 2020-21. Brief facts of the case are that the assessee is an individual having income from contract business and house property and had filed the return of income for the AY 2020-21 u/s 139(1) of the Act showing total income of Rs.11,46,33,570/-. A search and seizure action under section 132(1) of the Act was conducted on 22.12.2020 at the residential and business premises of the assessee belonging to 'Contractors Group'. Subsequent to the notice issued u/s 153A of the Act, the return of income for the above assessment ye....
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....3 of the assessment order, or in the penalty order. The assessee had filed written submissions in response to the notice issued and this fact is mentioned in para 2 of the assessment order. The disclosure so made was accepted without any enquiry nor any further enquiry was made by the Ld. AO. During the course of hearing before us, the Ld. AR has relied upon the decision of the Hon'ble Supreme Court in the case of K. Krishnamurthy vs. Deputy Commissioner of Income-tax [2025] 171 taxmann.com 413 (SC)/[2025] 303 Taxman 499 (SC)/[2025] 473 ITR 557 (SC)[13-02-2025], specifically paras 31, 34, 35 extracted as under, in support of the claim that the penalty was not leviable: "31. This Court is of the view that though under Section 271AAA(1) of the Act 1961, the Assessing Officer has the discretion to levy penalty, yet this discretionary power is not unfettered, unbridled and uncanalised. Discretion means sound discretion guided by law. It must be governed by rule, not by humour, it must not be arbitrary, vague and fanciful. [See: Som Raj v. State of Haryana (1990) 2 SCC 653]. 34. The expression 'Undisclosed Income' has been defined in Explanation (a) appende....
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....asis of a disclosure of Rs.1.70 Crore "as discovered in the documents seized during the course of search and seizure action on the assessee, which has been disclosed in the ITR and taxes thereon have been paid by the assessee." However, neither the details of annexure vide which these documents were found and seized nor the nature of the document or any specific mention of the amount in these documents has been mentioned in the assessment order. A perusal of the order u/s 271AAB of the Act shows that in response to the show cause notice dated 07.04.2022 issued u/s 271AAB(1A)(a) of the Act, the assessee did not file any reply, but to the further notices issued on 04.07.2022 and 31.08.2022, the assessee filed a reply on 01.09.2022 which has been reproduced in the penalty order. It was stated in the reply filed that the assessee had disclosed a sum of Rs.1.70 Crore as the rental income from house property in order to have peace of mind and to avoid litigation and penalties. The disclosure was made on the basis of the loose sheets which were found during the search and the same were not verifiable to be genuine and the Investigating Officer also verified from the various parties/source....
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....ell as on facts in levying penalty u/s 271AAB of Rs. 51,00,000/-. In the penalty order, the AO observed that the definition of undisclosed income as specified in the relevant Section is applicable to the Appellant and the penal provisions cannot be interpreted in an inclusive manner. The AO rejected the Appellant's contention that additional income was offered only to have peace of mind and to avoid litigation. The AO proceeded to impose penalty of the impugned amount. During the appellate proceedings, the Appellant pleaded that no penalty can be levied since no addition was made in the assessment order. It was explained that disclosure u/s 132(4) of the Act amounting to Rs. 1.70 cr was made on account of undisclosed rental income received in cash during the year under consideration. The same was discovered in the documents seized during the course of search action at his premises. The Appellant further stated that the said undisclosed income was declared in the ITR and corresponding taxes have been duly paid. It has been averred by the Appellant that the said additional income does not fall within the definition of Undisclosed income as per the Act. On perusa....
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....anner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a). (2) No penalty under the provisions of section 270A or clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) or sub-section (1A). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued 22[under section 148 or under section 153A, as the case may be,] for furnishing of return of....
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....enalties. However, it has not specified the manner of earning such income and the same amount has also been disclosed in AY 2021-22 which is also the specified previous year as per sub-clause (ii) of clause (b) of the Explanation below sub-section (3) of section 271AAB of the Act and which is relevant for the appeal in ITA No. 257/GTY/2024 for AY 2021-22 while for the impugned assessment year sub-clause (i) of clause (b) of the Explanation is relevant. 12. Further, while the assessee's argument that he had made a disclosure only in order to purchase peace and to avoid litigation is not tenable in view of the decision of the Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs. Commissioner of Income-tax - II [2013] 38 taxmann.com 448 (SC)/[2013] 358 ITR 593 (SC)/[2013] 263 CTR 1 (SC)[30-10-2013], wherein it has been held that voluntary disclosure does not relieve the assessee from the mischief of penal proceeding u/s 271(1)(c) of the Act. Thus, in the case of the assessee, the penalty was liable to be levied as per the provisions of sub-section (1A) of section 271AAB of the Act even if he had made the disclosure for any reason including peace of mind. The Hon'ble S....
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...., there is no discretion available with the Ld. AO as per the provisions of the Act to either reduce the penalty or to waive it off. 14. However, the penalty was leviable only on the 'undisclosed income' which has not been quantified by the Ld. CIT(A). We have also noticed that the Ld. AO has not mentioned as to what were the documents found and seized for computing the undisclosed income as the penalty can be levied only on the basis of the sum computed at the rate of 30% or 60% as the case may be of the 'undisclosed income' of the specified previous year. As per clause (c) of the Explanation to section 271AAB of the Act, the 'undisclosed income' is defined in an exhaustive manner. The Ld. AO has not mentioned any entry in the books of account or other documents or transactions found during the course of search on the basis of which he has concluded that it is the 'undisclosed income' of the assessee on which the penalty is levied. Even the Ld. CIT(A), while confirming the penalty, has not mentioned as to what was the undisclosed income and how was the same computed. In this respect, we note that Section 250(6) of the Act casts a duty on the Ld. CIT(A) to pass an order in appea....
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....he law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act. The relevant extract is as under: 8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by t....