INCOME TAX ACT, 1961

Section 271AAB

Penalty under section 271AAB - Defective notice - Show-cause notice not specified default in term of clauses (a) to (c) of section 271AAB(1) -

During the course of search and seizure, a pocket diary was found and seized as Exhibit 2 Annexure AS containing notings of advances for purchase of land on different dates total amounting to Rs. 24,58,50,000. The assessee in his statement recorded under section 132(4) disclosed the said income of Rs. 24,58,50,000 as additional business income for the year under consideration. AO initiated penalty proceedings under section 271AAB by issuing a show cause notice. The AO while passing the penalty levied penalty @ 10% of the undisclosed income offered to tax. The assessee challenged the action of the AO before the CIT(A) and also raised an objection regarding the validity of initiation of proceedings, however, he could not succeed. AR had referred to the show cause notice and submitted that it is evident that the said notice was issued in a casual manner without specifying the limb/clause of section 271AAB(1) which was applicable in the case of the assessee. AR stated that the penalty order passed by the AO was therefore, not sutainable in law when the initiation of proceedings suffers from illegality.Held: There was a consistent view taken by the Tribunal that the penalty under section 271AAB is not mandatory but the same is discretionary because the AO was required to take a decision on the point that the conditions provided under section 271AAB are satisfied to hold that the income disclosed by the assessee was an undisclosed income and attracts the penalty as per the specific clauses (a) to (c) of sub-section (1) of section 271AAB. When the AO had failed to specify the default attracting the levy of penalty in terms of clauses (a) to (c) of section 271AAB(1), the said show-cause notice suffers from illegality and consequently the order passed by the AO under section 271AAB was not sustainable and liable to be quashed.

Relied:Ravi Mathur v. Dy. CIT [ITA No. 969/JP/2017, dt. 13-6-2018] : 2019 TaxPub(DT) 3754 (JP-Trib) and Padam Chand Pungliya v. Asstt. CIT [ITA No. 112/JP/2018, dt. 5-5402019] : 2019 TaxPub(DT) 2207 (JP-Trib).

REFERRED : CIT v. Manjunatha Cotton & Ginning Factory (2014) 359 ITR 565 (Karn) : 2014 TaxPub(DT) 202 (Karn-HC), Muninaga Reddy v. ACIT (2016) 396 ITR 398 (Karn) : 2016 TaxPub(DT) 4490 (Karn-HC), CIT v. SSA's Emerald Meadows (2016) 73 Taxmann.com 248 (SC) : 2016 TaxPub(DT) 4242 (SC),Pr. CIT v. Sandeep Chandak (2017) 405 ITR 648 (All) : 2017 TaxPub(DT) 5170 (All-HC), Rajendra Kumar Gupta v. Dy. CIT [ITA No. 359/JP/2017] : 2019 TaxPub(DT) 3753 (Jp-Trib), Raja Ram Maheshwari v. Dy. CIT [ITA No. 992/JP/2017] : 2019 TaxPub(DT) 3752 (Jp-Trib) and Rambhajo's v. Asstt. CIT [ITA No. 991/JP/2017] : 2019 TaxPub(DT) 1408 (Jp-Trib).

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 271AAB

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