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Facts
A search operation on DSC Group led to the assessee surrendering Rs. 28.24 crores as additional income under Section 132(4), which was included in the return of income. The Assessing Officer levied a penalty of Rs. 5.64 crores under Section 271AAB(1)(b) on this undisclosed income. The CIT(A) subsequently deleted this penalty, deeming it discretionary and noting the income was offered under Section 132(4).
Held
The Income Tax Appellate Tribunal reversed the CIT(A)'s order, finding that the assessee failed to substantiate the source of the additional income. Consequently, the Tribunal held that the case squarely fell within Section 271AAB(1)(b) of the Act, upholding the penalty levied by the Assessing Officer.
Key Issues
Whether the penalty levied under Section 271AAB of the Income-tax Act, 1961, on income surrendered during a search operation and offered in the return of income, was justified, specifically challenging the CIT(A)'s decision to delete it.
Sections Cited
143(3), 69A, 132(4), 271AAB, 271AAB(1), 271AAB(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI YOGESH KUMAR U.S.
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in for AY 2013-14, arises out of the order of the Commissioner of Income Tax (Appeals)-26, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 10098/2012-13 dated 04.07.2023 against the order of assessment passed u/s 271AAB(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 25.03.2022 by the Assessing Officer, ACIT, Central Circle-14, New Delhi (hereinafter referred to as ‘ld. AO’).
The only issue to be decided in this appeal is as to whether the ld CIT(A) was justified in deleting the penalty u/s 271AAB of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the material available on record. A search and seizure operation was carried out on 28.08.2012 at DSC Group including the assessee. The group is engaged in construction of road projects, execution of contractual works including the extension of widening of highways, construction of flyovers, culverts, rehabilitation/ strengthening of railway tracks. The assessment was completed u/s 143(3) of the Act on 31.03.2016 determining the total loss of Rs. 104,60,31,501/- against the returned loss of Rs. 1,05,45,78,526/- after making an addition u/s 69A of the Act on the basis of seized documents to the tune of Rs. 40 lakhs and Rs. 45 lakhs. At the time of search, a statement was recorded from the Managing Director Shri Manohar Singh Narula on 29.08.2012 wherein, in response to Question No. 28 the Managing Director came forward to offer total sum of Rs. 75 crores (Rs. 45 + Rs 30 crores) to cover all the discrepancies in the group. In the return filed, the assessee disclosed a sum of Rs. 28,24,50,000/- as additional income offered at the time of search. Assessment was completed accepting the same. The ld AO proceeded to levy the penalty u/s 271AAB of the Act on the said additional income surrendered and offered in the search. The ld AO levied penalty u/s 271AAB (1)(b) of the Act @20% of undisclosed income of Rs. 28,24,50,000/- amounting to Rs. 5,64,90,000/- on the ground that this undisclosed income got unearthed only pursuant to the search and during the search, the assessee came forward to offer the same.
The ld CIT(A) deleted the levy of penalty stating that income is offered for taxation in the statement u/s 132(4) of the Act and taxes paid thereon and that the levy of penalty u/s 271AAB of the Act is discretionary and not mandatory.
We find in the instant case that the assessee had surrendered a sum of Rs. 28.24 crores in the statement u/s 132(4) of the Act and had duly honored the same by offering it in the return of income after due payment of taxes thereon. The assessee could not substantiate the manner in which such additional income was received. Hence, the case of the assessee squarely falls within the ambit of section 271AAB(1)(b) of the Act which has been rightly invoked by the ld AO in the instant case. Accordingly, we deem it fit to reverse the order of the ld CIT(A) and uphold the levy of penalty by the ld AO. The grounds raised by the revenue are allowed.
In the result, the appeal of the revenue is allowed.