Penalty u/s 271(1)(c) not imposable for Undisclosed Income detected on Search initiated before Assessment Year: ITAT [Read Order]

The Delhi bench Income Tax Appellate Tribunal (ITAT) comprising Shri Challa Nagendra Prasad, judicial member & Shri Pradip Kumar Kedia, accountant member 

The assessee, M/s. BLK Lifestyle Ltd challenged the imposition of a penalty of Rs.3,00,880/- under Section 271(1)(c) of the Income Tax Act,1961.

A search and seizure operation was conducted on 19.02.2008 in the case of the assessee and related group M/s. B.L. Kashyap & Sons Group. The assessee filed a return on 26.09.2008 and declared a loss of Rs. (-) 5,84,55,622/-. The AO initiated the penalty proceedings under section 271(1)(c) of the Income Tax Act,1961 after considering certain reliefs granted by the appellate order in the quantum proceedings.

 The assessee contended that the case falls under Section 271AAA of the Act applicable at the relevant time and contended that the whole proceedings under Section 271(1)(c) culminating in the imposition of a penalty of Rs.3,00,880/- was void ab initio.

It was observed that the due date for filing of return of income for Assessment Year 2008-09 had neither expired nor the assessee filed any return before the search and the case falls within the purview of expression ‘specified previous year’ under Section 271AAA of the Act.

The Tribunal held that the undisclosed income by way of difference in closing stock and disallowances of expenses based on seized material could culminate in penal action under Section 271AAA and cancel the penalty imposed. The appeal of the assessee was allowed.

The appellant was represented by Shri Saurav Rahtogi and the respondent was represented by Mrs Suman Malik.

To Read the full text of the Order CLICK HERE

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