Income Tax Act, 1961 - Section 271AAA - A search and seizure operation was conducted on 25th November 2010 under Section 132 of the Act at the premises of the assessee. During the search, the assessee disclosed an income of Rs.2,27,65,580/- before the Deputy Director of Income Tax (Investigation) [DDIT(Inv.)] for Assessment Year (AY) 2011-2012. Subsequently, a return of income was filed for AY 2011-2012, declaring a total income of Rs.4,78,02,616/-. The Revenue imposed a penalty under Section 271AAA on the entire declared income, on the ground that the conditions under Section 271AAA(2) were not met, particularly the requirement to pay tax along with interest in a timely manner. The penalty order was upheld by the CIT(A) and the ITAT, and further confirmed by the High Court in ITA No. 125 of 2017 - Whether the penalty under Section 271AAA of the Income Tax Act, 1961, is leviable on the entire disclosed income, or only on the portion of income that was not admitted during search proceedings – HELD - The imposition of penalty under Section 271AAA(1) is discretionary and not automatic. Section 271AAA(2) provides an exemption from penalty if the assessee (i) admits the undisclosed income during the search, (ii) specifies and substantiates the manner in which such income was derived, and (iii) pays the tax along with interest. The Court found that these conditions were satisfied for the sum of Rs.2,27,65,580/-, albeit with a delay in tax payment. Since Section 271AAA does not prescribe a specific time frame for such payment, the penalty could not be imposed on this portion of the income. However, with respect to Rs.2,49,90,000/-, it was found that this amount was not admitted during the search but was disclosed later during assessment proceedings only after the Assessing Officer sought copies of sale deeds from the Society. As this amount constituted "undisclosed income" under Explanation (a) to Section 271AAA, penalty at the rate of 10% was justified on this amount - The penalty was restricted to 10% of Rs.2,49,90,000/- and not on the entire declared income of Rs.4,78,02,616/-. The Revenue was directed to modify the penalty order accordingly - the appeal was partly allowed
Income Tax Act, 1961 – Sections 276CC and 279(2) - The assessee, an individual earning income through salary and partnership profits, filed income tax returns for AY 2011-12 and AY 2013-14 belatedly. A show cause notice was issued under Section 276CC for AY 2011-12, and later, another notice was issued for AY 2013-14. The assessee applied for compounding of the offence under the 2014 Compounding Guidelines, arguing that the delay was unintentional due to financial constraints. The Chief Commissioner of Income Tax (CCIT) rejected the compounding application for AY 2013-14, stating that it was a repeat offence and did not qualify as a "first offence" under the guidelines. The High Court upheld the rejection, holding that the actual date of filing determines the offence, and since the return for AY 2013-14 was filed after the show cause notice for AY 2011-12, it was not the first offence - Whether an offence under Section 276CC is committed on the actual date of belated filing or on the day immediately after the due date as per Section 139(1) - Whether the assessee’s delayed return filing for AY 2013-14 qualified as a first offence under the 2014 Compounding Guidelines - Whether the 2014 Guidelines are mandatory or directory, allowing discretion in compounding - HELD - An offence under Section 276CC is deemed to be committed immediately after the due date for filing returns as per Section 139(1), irrespective of when the return is actually filed. Relying on Prakash Nath Khanna v. CIT, the Court ruled that the actual filing date does not determine the offence, preventing taxpayers from escaping liability by indefinitely delaying filings. Since both offences for AY 2011-12 and AY 2013-14 were committed before any show cause notice was issued, the latter qualified as a first offence under the 2014 Guidelines and should have been compounded. The Court also held that the Guidelines are not absolute law, and discretion should be exercised in light of the facts - The CCIT's rejection of compounding was set aside, and the compounding application was directed to be reconsidered in line with the correct interpretation of "first offence." The appeal was allowed in favor of the assessee