The Hyderabad bench of Income Tax Appellate Tribunal (ITAT), while directing re-adjudication observed that penalty under Section 271AAC Income Tax Act, 1961 would not be applicable if tax under Section 115BBE of Income Tax Act was mentioned at zero.
Assesee Vijay Kumar Reddy is an individual and filed his return of income declaring total income at Rs.1,25,14,090/-.
The police authorities found cash of Rs.45.00 lakhs from an employee of the assessee and the said cash was owned up by the assessee during the inquiries conducted.
The said cash was requisitioned by the Investigation Wing under Section 132A of the Act.
Section 132A of the Income Tax Act the investigation wing of the department requisitioned the case.
Thereafter, the amount of Rs 45 lakh included his return but when asking about the source of income the assessee explained that he is earning his income by arranging mediation between the buyers and sellers under the real estate.
The Assessing Officer rejected the explanation and treated the cash seized of Rs.45.00 lakhs as unexplained income under Section 69A r.w.s. 115BBE of the Income Tax Act.
Thereafter, AO initiated penalty proceedings under Section 271AAC of the Income Tax Act on the seized cash of Rs.45.00 lakhs found at the time of the cash seizure operation.
Then the matter was preferred before the CIT(A). Since the assessee did not appear before CIT (A) despite the number of opportunities granted CIT(A) passed an ex parte order.
Aggrieved CIT(A) order assessee filed an appeal before the tribunal.
Before the bench T. Chaitanya Kumar counsel for the assessment submitted that tax on 115BBE has been mentioned as zero, therefore, no penalty under Section 271AAC of the Income Tax Act should be levied.
KPRR Murthy, counsel for the revenue, supported the decision of the CIT(A).
It was observed by the tribunal that AO in the instant case levied a penalty under Section 271AAC on the ground that the assessee could not explain the source of Rs.45.00 lakhs from real estate activities by producing cogent documentary evidence, for which the addition was made under Section 69A r.w.s. 115BBE of the Income Tax Act.
While considering the statement of the assessee the tax under Section 115BBE is mentioned at zero and therefore, no penalty under Section 271AAC of the Income Tax Act Should be levied also assessee is in a position to substantiate before the lower authorities as to how the penalty under Section 271AAC of the Income Tax Act is not leviable.
The tribunal of Shri R.K. Panda, Accountant Member and Shri Laliet Kumar, Judicial Member after considering the facts and circumstances, allowed the appeal filed by the assessee and restored the matter for re-adjudication.
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