The Ahmedabad bench of the Income Tax Appellate Tribunal, recently upheld the order of the Commissioner of Income Tax (Appeals) who, vide its order, set aside the penalty order against the assessee by holding that the appellant is deemed to have fulfilled the first two conditions for availing of immunity from penalty proceedings u/s 271AAA of the income Tax Act. Relying on the decision of the Gujarat High Court in the case of Mahendra C. Shah, the CIT(A) had deleted the penalty imposed against the assessee. The said order was challenged by the Revenue before the Appellate Tribunal in which the Tribunal confirmed the same.
Coming to the facts of the case, the assessee has admitted his undisclosed assets found during the course of search as well as earning of undisclosed income on the basis of entries made in the seized papers. The Officer, however, initiated penalty proceedings against assessee on ground that the admission may be treated as disclosure made as per statement u/s 132(4) of the Act only, for the reason that proper scrutiny of seized material is always not possible for making disclosure during the course of search.
On appeal, the Commissioner of Income Tax (Appeals)quashed the order observing that “However, so far as specifying and substantiating the manner in which income has been earned is concerned, there is nothing on record to suggest that any such question was asked to the appellant either in the statement recorded u/s 132(4) of the Act or even during the course of assessment proceedings. It is noted that the appellant has responded to all the questions asked u/s 132(4) of the IT Act relating to his financial affairs. Unless specific question is asked to the appellant either in the statement recorded u/s 132(4) or even during the course of assessment proceedings, it may not be proper to attribute the failure, if any, for not specifying and substantiating the manner in which income was earned, to the appellant.” Further, the CIT(A) held that “so far as the manner of earning the income and substantiating the same is concerned, the appellant has, in my view, not specified the manner of earning the undisclosed income as well as substantiated the same since no question as regards specification of manner of earning the undisclosed income and substantiation thereof was put forth in the statement recorded u/s 132(4) of the Act. There is nothing on record to suggest that the appellant has failed to respond to any of the questions relating to the manner of earning undisclosed income as well as substantiating the same even during the course of assessment proceedings. In view of this, the appellant is deemed to have fulfilled the first two conditions for availing of immunity from penalty proceedings u/s 271AAA of the Act. There is no dispute about the third condition as the appellant has paid tax with interest on the undisclosed income. Thus, the appellant has fulfilled all the conditions required for immunity from levy of penalty u/s 271AAA of the Act.”
Concurring with the above findings, the Appellate Tribunal noted the fact that during the course of search itself the assessee had accepted the above undisclosed income and explained the source thereof to be business operations of the assessee.
Read the full text of the order below.
