No Penalty since Assessee Voluntarily Surrendered Income, Paid Tax and Explained Its Source: ITAT [Read Order]

While dismissing a departmental appeal, the Delhi ITAT ruled that penalty under section 271AAA of the Income Tax Act cannot be levied since Assessee voluntarily surrendered Income, paid Tax and explained its source.

The bench including Beena A. Pillai, Judicial member, and R. K. Panda, the accountant was considering an appeal of revenue against assessees, Beena Kedia and Raj Kumar Kedia.

The department held a search and seizure operation u/s 132 subsequently AO initiated penal proceedings under section 271AAA of the Income Tax Act for the undisclosed income has been derived.

With regard to the issue of undisclosed income, the assessee submitted that the same was earned from the share transactions i.e. speculative and F&O dealing. Further, applicable taxes had already been paid. Thereafter Assessee noticed that no documents supporting the claim had produced accordingly applying the provisions of section 271AAA levied the penalty.

The assessee, on the first appeal, submitted that the AO has completed the assessment at the income declared by the assessee and no reference to any incriminating material has been made. Eventually, the CIT (A) held that such penalty cannot be sustained since AO was not raised the specific query at the time of recording of statement u/s 132(4) to substantiate the manner of earning of declaring income.

Aggrieved by the order, the Revenue carried the matter to the Tribunal and therein Assessee produced certain document evidencing that no specific query was raised. In order to support these contentions, the Assessee sought the decision of Delhi Bench of the Tribunal in the case of Neerat Singal vs. ACIT.

On the counterpart, the Revenue pressed the relevance of proposition laid by various decisions. The tribunal on observing the recitals, documents and paper book admitted that assessee during the course of search has surrendered the amount of Rs.1,50,00,000/- on which tax has been paid.

The bench opined that such penalty under section 271AAA cannot be levied in view of the decision of the Delhi High Court cited and it was explained that such income was on account of share transactions i.e. speculative and F&O dealing.

Finally, the bench restored the observation of CIT (A) for cancelling the penalty so levied by the Assessing Officer u/s 271AAA of the Income Tax Act.