The case between the Assistant Commissioner of Income Tax (ACIT) Circle, Karnal, the appellant, and Best Foods Ltd., New Delhi, the respondent, pertains to the Assessment Year (AY) 2011-12. The case was filed on 13th June 2019 and concluded with a final order on 11th October 2023. The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘A’.
A search and seizure operation was conducted at the residential and business premises of the Best Foods group on 23rd November 2010. During the operation, the Managing Director (MD) of the company, Sh. Dinesh Gupta, admitted to Rs. 44 crores as unaccounted income of the group, which was voluntarily offered as additional income. However, the Assessing Officer (AO) alleged that the assessee showed the surrendered income of Rs. 44 crores as income from other sources and issued a notice under Section 271AAA of the Income Tax Act. The AO was not satisfied with the explanation of the source and manner of earning the income and imposed a penalty. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, leading to the Revenue’s appeal.
The appellant challenged the order dated 31st March 2019 passed by the CIT(A)-3, Gurgaon, raising the following grounds:
The Tribunal noted that a search and seizure operation was conducted at the residential and business premises of the Best Foods group on 23rd November 2010. In the statement recorded during the search, Sh. Dinesh Gupta, MD of the company, admitted that Rs. 44 crores were unaccounted income of the group, which was voluntarily offered as additional income. However, the AO alleged that the assessee showed the surrendered income as income from other sources.
The AO was not satisfied with the explanation provided by the assessee regarding the source and manner of earning the income and issued a notice under Section 271AAA of the Income Tax Act. The AO concluded that the assessee had not been able to substantiate the source and manner of earning the income and imposed a penalty.
The CIT(A) deleted the penalty imposed by the AO, stating that the Tribunal in appeal no. 1185/Del/2014 had deleted the addition in the quantum appeal. The CIT(A) noted that the Tribunal had accepted the explanation provided by the assessee regarding the source and manner of earning the income and had concluded that the income disclosed during the search was part of the cash sales and included in the books of accounts.
The Tribunal upheld the CIT(A)’s decision to delete the penalty imposed under Section 271AAA of the Income Tax Act. The Tribunal noted that in the quantum appeal, a co-ordinate Bench had found that the amounts disclosed during the search were part of the cash sales and included in the books of accounts, substantiating the manner of earning the alleged undisclosed income. The Tribunal concluded that the CIT(A) was not in error in deleting the penalty imposed under Section 271AAA.
The appeal by the ACIT Circle, Karnal against Best Foods Ltd. was dismissed by the ITAT. The Tribunal concluded that the penalty imposed under Section 271AAA was not justified, as the assessee had provided sufficient evidence to substantiate the manner of earning the income disclosed during the search. The CIT(A)’s decision to delete the penalty was upheld.
Order pronounced in the open court on 11th October 2023.
President: G.S. Pannu
Judicial Member: Anubhav Sharma
Date of Order: 11.10.2023
Copy forwarded to:
Assistant Registrar, ITAT, New Delhi
Penalty Under Section 271AAA: ACIT Circle Karnal vs Best Foods Ltd for AY 2011-12
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