The Income Tax Appellate Tribunal (ITAT ) Delhi bench deleted the penalty under section 271AAA of the Income Tax Act, 1961 due to lack of opportunity to explain the undisclosed income source during the search proceedings.
Assessee, Vikram Dhirani surrendered an income found during the course of search proceedings and voluntarily included the same in the return of income and also paid tax. However, without providing proper opportunity AO made a penalty under Section 271AAA of the Income Tax Act.
Aggrieved by the order assessee filed an appeal before the CIT(A), who dismissed the appeal of the assessee. Thereafter the assessee filed an appeal against the CIT(A) order before the tribunal.
P. C. Yadav, Counsel for the assessee argued that Due to the assessee’s voluntary inclusion of the contested cash in their income tax return and payment of taxes, the assessing officer did not add anything to the assessment order for the AY 2012–13.
Further argued that no specific query had been put to the assessee by drawing his attention to the provisions of section 271AAA asking him to specify the manner in which the undisclosed income surrendered during the course of search had been derived.
Anuj Garg, Counsel for Revenue Submitted that assessee has not specified the manner in which undisclosed income was derived in the statement recorded under Section 132(4) of the Income Tax Act, therefore, penalty was rightly levied by the Assessing Officer.
It was observed that there was no specific question by the officer recording reasons to the assessee asking to specify the manner in which undisclosed income was derived.
Thus when the assessee hasn’t received a specific query or question asking him to substantiate how undeclared income was obtained, despite being made aware of the relevant provisions of Section 271AAA’s subsection (2), the penalty under that section will not stand.
After considering the facts submitted and circumstances, the two member bench of Dr. B. R. R. Kumar (Accountant Member) and C.M. Garg (Judicial Member) deleted the penalty under section 271AAA of the Income Tax Act due to lack of opportunity to explain the undisclosed income source during the search proceedings and due compliance with the all requirements of mandate of law envisaged in sub section (2) of Section 271AAA of the Income Tax Act.
Therefore the bench allowed the appeal.
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