The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty proceedings under Section 271AAB(1A) of the Income Tax Act, 1961 is not mandatory and cannot be initiated by the Assessing Officer (AO) without specifying the default of the assessee.
The assessee derives income from Salary, House Property, Business or profession, and income from other sources. A search and seizure action under Section 132 of the Income Tax Act was carried out at the premises of the assessee in connection with search and seizure action in Saini-GuptaMalpani-Somani Group of Ajmer. The assessee filed his original Return of Income (ROI) under Section 139(1) of the Income Tax Act declaring a total income of Rs. 3,34,40,150/-.
During the course of assessment proceedings, the appellant furnished only a revised computation of total income, but neither any revised ROI was found available on the e-filing portal/departmental system nor furnished by the appellant. An addition of Rs. 2,87,50,000/- to the returned income on account of undisclosed Business Income assessment proceedings under Section 143(3) of the Income Tax Act was completed at a total income of Rs. 6,21,90,150/-.
The AO also initiated penalty proceedings under Section 271AAB(1A) of the Income Tax Act separately and accordingly issued show cause notices under Section 271 read with section 274 of the Income Tax Act without specifying the default prescribed under Section 271AAB(1A) of the Income Tax Act.
The Two-member bench comprising of Sandeep Gosain (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that the entries in the seized documents representing the commission sales in the absence of the real transactions do not constitute the undisclosed income of the assessee as defined in the explanation to Section 271AAB(1A) of the Income Tax Act.
Accordingly, the penalty levied under Section 271AAB(1A) of the Income Tax Act in respect of the said amount was not sustainable and liable to be set aside. Accordingly, the penalty levied by the AO under Section 271AAB(1A) of the Income Tax Act was deleted. Thus, the appeal of the assessee was allowed.
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