The Income Tax Appellate Tribunal (ITAT), New Delhi Bench while deleting the penalty ruled that the assessee surrendered the undisclosed income and paid tax thereon.
The search and seizure operation was conducted at the business and residential premises of Shri Ashish Mittal along with K R B L Group of cases as contemplated in the earlier parts hereinabove in case of Ashish Mittal for Assessment Year 2010-11.
The Assessing Officer concluded that the assessee has earned undisclosed income amounting to Rs. 64,255 as per the provisions of Section 271AAB of the Act. The assessment was completed under section 143(3) of the Act at Rs.27,41,170.
Accordingly notice under section 271AAB was also issued to the assessee. In response to the said notice, the assessee filed detailed submissions. T
he Assessing Officer was of the opinion that in this case, though the assessee has admitted the undisclosed income and paid taxes thereon after the search, however, he has not satisfactorily explained the reasons for his default. Accordingly, the case of the assessee falls within the ambit of Clause (b) of Section 271AAB of the Act on account of surrender made after the search amounting to Rs.64,255/- and so penalty is attracted.
The Assessing Officer further observed that the case of the assessee clearly falls within the purview of undisclosed income as per the provisions of Section 271AAB (b) which is mentioned in the assessment order while recording satisfaction, as well as the same, is also specifically mentioned in the penalty notice.
The Assessing Officer imposed penalty under section 271AAB on the undisclosed income of Rs. 64,255 as the assessee disclosed the said amount after the search proceedings thereby holding that as the assessee did not explain the manner of earning such income during the search proceedings under section 132 of the Act penalty at the rate of 20% of undisclosed income to the tune of Rs. 12,851 was levied on the assessee.
The assessee submitted that the Assessing Officer has not contemplated the proper penalty notice as per the provisions of Section 271AAB. The Assessing Officer was not correct in imposing the penalty under section 271AAB as the assessee has surrendered the income and also paid taxes accordingly. Thus, the penalty may be deleted.
The coram of R.K.Panda and Suchitra Kamble noted that the Assessing Officer specifically at the time of penalty proceedings contemplated Clause B of Section 271AAB of the Act. But the limb of Clause B specifically mentions that if such assessee in the course of search in a statement under Sub Clause 4 of Section 132 does not admit the undisclosed income.
“However, in the present case, the assessee has very much admitted the undisclosed income and surrendered the undisclosed income. The assessee also paid the tax thereon. Besides this, the notice upon which the assessee is bound to give a reply is vague and not as per provisions of the Income Tax Statute. The Revenue Authorities have not properly adjudicated/ invoked in the true spirit of the penalty Provisions to impose a penalty on the assessee,” the ITAT while allowing the appeal said.
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