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Sh. Padam Singhee, New Delhi vs. DCIT, New Delhi - (Income Tax Appellate Tribunal) (16 May 2023)

Penalty under Section 271AAA of IT Act cannot be imposed on the basis of surrendered amount


Direct Taxation

Present appeal has been preferred by the Assessee against the order of CIT(A)-XXXI arising out of an appeal before it against the order passed under Section 271AAA of the Income Tax Act, 1961 (IT Act) by the DCIT (AO). Issue raised in present case is whether the AO and Commissioner of Income Tax (Appeals) erred by levying penalty on the Appellant.

Admittedly, the surrendered income 4.27 crores was offered in the return of the relevant year and tax has been paid thereon. Further, before Learned CIT(A), it was established that no statement under Section 132(4) of the Act was recorded and the correspondence between the assessee and the department also had no inquiry about the manner in which the surrendered income has been derived. Delhi High Court in case of Bhagirath Aggarwal v. CIT has held that, "if an assessee voluntarily makes a surrender, the officials of the income tax department are bound to record that statement under Section 132(4) and such a statement, voluntarily made, is relevant and admissible and is liable to be used as evidence". Thus, where no statement under Section 132(2) of the Act is recorded or specific query is made during assessment, for the purpose of Section 271AAA of the Act, then no inference can be drawn that assessee failed to specify the manner in which such income has been derived or substantiates the manner in which the undisclosed income was derived, so as to levy the penalty.

At the same time, the order of a Co-ordinate Bench at Delhi in Rajendra Aggarwal vs. BCIT ITA is also relevant where it is held that, the initiation of penalty under Section 271AAA cannot be on the basis of surrendered amount which cannot be termed as undisclosed income for the purpose of Section 271AAA of the Act. The appeal of assessee is allowed.


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