No Penalty u/s 271AAB unless undisclosed income found from seized material. Disclosure made in statement u/s 132(4) not sufficient to levy penalty
ABACUS Case Law Citation
ABCAUS 3360 (2020) (08) ITAT
Important case law relied upon by the parties:
Ravi Mathur vs. DCIT
Dinesh Kumar Agarwal vs. ACIT
Raja Ram Maheshwari vs. DCIT
M/s. Rambhajo’s vs. ACIT
Gopal Das Sonkia vs. DCIT
Rajendra Kumar Gupta vs. DCIT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming penalty imposed by the Assessing Officer u/s 271AAB of the Income Tax Act, 1961 (the Act).
The assessee was an Individual deriving income from Salary/ Remuneration from the company in which he was Director as well as income from other sources.
A search and seizure action under section 132 of the Act was carried out in case of a Group under which the assessee was also covered.
In the course of search and seizure proceedings a diary was sized wherein few entries were recorded for the payment of land. As a result, the assessee offered income for the current year. The assessee filed return of income including the income offered during the course of search.
The assessment u/s 143(3) read with section 153B(1)(b) of the Act was completed accepting the returned income. The AO thereafter initiated the penalty proceedings under section 271AAB of the Act by issuing a notice under section 274 read with section 271AAB of the Act.
Finally, the AO levied the penalty under section 271AAB of the Act @ 10% of the income disclosed and surrendered by the assessee while passing the impugned penalty order.
The assessee challenged the order of the AO levying the penalty before the CIT(A). However, the CIT(A) rejected the contentions raised by the assessee and upheld the levy of penalty under section 271AAB of the Act.
Before the Tribunal, the assessee contended that what was disclosed during the course of search and seizure action was the additional income and not an undisclosed income.
He further submitted that even otherwise the income disclosed by the assessee during the course of search and seizure did not fall in the definition of undisclosed income as provided in explanation to section 271AAB of the Act.
Referring to the seized material, it was submitted that the entries in the seized diary were very vague and did not represent any underlying assets. All the entries are regarding advances for land whereas neither any evidence in the form of any receipt or agreement to show that there is an actual transaction of advance nor any details or particulars of land are found or brought on record to show that the advances were given for purchase of the said land. Thus these are only vague entries and containing imaginary names and details.
Thus, it was contended that the said seized documents were nothing but dumb and deaf papers without indicating any undisclosed income of the assessee.
It was stated that the assessee had surrendered the income just to buy peace and unnecessary litigation. There was no iota of evidence that the surrendered income was undisclosed income of the assessee. When there is no actual transaction of advance or purchase of land or even description of any land for which the alleged advances were given, then the disclosure of the said income by the assessee as an additional income could not be treated as undisclosed income of the assessee.
The assessee also referred to the CBDT Circular No. 286 of 2003 dated 10th March, 2003 which was repeated in 2018 and submitted that the Board expressed its concern about the practice of confession of additional income during the course of search and seizure proceedings which do not serve any useful purpose in the absence of any evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed.
Thus, it was submitted that in the absence of any undisclosed income indicated or discovered on the basis of seized material, the disclosure made in the statement u/s 132(4) is not sufficient to levy the penalty under section 271AAB of the Act.
The Tribunal noted that the seized material on the basis of which the assessee had disclosed income was a diary in which 5 entries were recorded in the nature of payments for land. Only certain names and amounts are written under the head ‘Against Land’. Neither any description of the land was given in the seized material nor even the complete particulars of the persons except some names.
The Tribunal said that the entries in the seized material did not reveal any income of the assessee but these were only the payments made by the assessee. Therefore, the seized material itself did not disclose any income for the year under consideration as the said payment may be representing the income of the past years or the income of some other person.
The department had not made any enquiry about the particulars of the land as well as the persons to whom the alleged payment was made. It was also not on record whether these imaginary names found written in the seized material were having any land under their ownership or not.
The Tribunal noted that in an identical issue the Bench had found that the department had concentrated only to obtain the surrender from the assessee but no relevant question or enquiry was conducted to find out the particulars of the land and the full particulars of the persons to whom the advances were given. The Bench had held that in the absence of the existence of the land for which the alleged advances were given, these entries alone would not ipso facto undisclosed income of the assessee.
Thus, on identical facts, the Bench had held that entries in the seized documents representing the payment on account of land in the absence of other essential facts regarding the particulars of land as well as persons did not constitute undisclosed income of the assessee as defined in the explanation to section 271AAB of the Act.
Accordingly, following the earlier decision, the Tribunal deleted the penalty levied under section 271AAB.
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