The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that penalty under Section 271AAA of the Income Tax Act, 1961 shall not be attracted on the income surrendered by the assessee if the department failed to record a statement under Section 132(4) of the Income Tax Act during the proceedings.
The appeal was preferred by the Assessee Shri. Padam Singhee against the order of Commissioner of Income Tax (Appeals) (CIT(A)), New Delhi arising out of an appeal before it against order of the Assessing Officer (AO).
The appeal was earlier disposed of for non-appearance of assessee and on filing in the miscellaneous application, the order was recalled. T. Kipgen appeared for the revenue and none appeared for the assessee.
The assessee challenged the legality of the levy of penalty contending that penalty shall not be levied where the assessee is not at fault or guilty of misconduct. The AO and CIT(A) erred in levying penalty without any specific finding to prove anything on record in relation to the additional income. Hence the penalty levied is without any basis, the assessee stated.
The CIT(A) had observed that no statement was recorded under Section 132(4) of the Income Tax Act, 1961 while the AO had mentioned in the penalty order that assessee has not furnished any explanation in respect of surrendered income under Section 132(4) either at the time of assessment proceedings or during penalty proceedings.
The assessee had admitted and surrendered income of 4.27 crores in the return and tax has been paid thereon. It was established that no statement was recorded under Section 132(4) of the Income Tax Act, 1961 and the correspondence between the assessee and the department also had no inquiry about the manner in which the surrendered income has been derived. Since the assessee voluntarily makes the surrender, department was bound to record that statement under Section 132(4) which is relevant, admissible and liable to be used as evidence.
The CIT (A) and AO erred by considering that assessee failed to fulfill the conditions of Section 271 of the Income Tax Act, 1961. The assessee had truly disclosed all the facts in the course of search whatever being asked by the oath administrator. Hence, penalty levied is against the provisions of the law and shall be deleted. Hence the penalty levied is unjustified.
The two-member bench consisting of Shri. Shamim Yahya (Accountant Member) and Shri. Anubhav Sharma (Judicial Member) observed that where no statement under Section 132(2) is recorded or specific query is made during assessment, for the purpose of Section 271AAA of the Act, then no inference can be drawn that assessee failed to specify the manner in which such income has been derived or substantiates the manner in which the undisclosed income was derived, so as to levy the penalty.
It was held that Surrendered income cannot be termed as undisclosed income for the purpose of Section 271AAA of the Income Tax Act, 1961.
The appeal of assessee is allowed.
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