Immunity from s.271AAA penalty available even if tax on undisclosed income unpaid till passing assmt order
Pursuant to a search u/s 132 the assessee disclosed additional income u/s 132(4) and offered the same to tax. However, the taxes due on the same were paid only after the passing of the assessment order. The AO held that as the taxes were not paid at the time of filing the ROI, the immunity from penalty u/s 271AAA was not available. This was reversed by the CIT (A) on the ground that u/s 271AAA (2), there was no precondition that the tax & interest had to be paid before filing of return or any other specified date. On appeal by the department, HELD dismissing the appeal:
S. 271 AAA makes a paradigm shift on the imposition of penalty in respect of unaccounted income unearthed as a result of search operation. Unlike s. 271(1)(c), s. 271 AAA penalty is imposable on undisclosed income without “concealment” or “furnishing inaccurate particulars” having to be shown. S. 271AAA(2) grants immunity from penalty if (i) in the s. 132(4) statement, the undisclosed income is admitted and the manner of deriving it is specified; (ii) the manner in which the undisclosed income was derived is substantiated; and (iii) the tax & interest on the undisclosed income is paid. While payment of taxes & interest is a condition precedent for availing immunity u/s 271AAA(2), there is no time limit for such payment. In the absence of a time limit for payment of tax & interest in the statute, the AO’s stand that it ought to have been paid at the time of filing the ROI is not acceptable. Further, though in the context of Explanation 5 to s. 271(1)(c) it has been held in Mahendra Shah 299 ITR 305 (Guj) that the conclusion of the assessment proceedings is the outer limit for making payment of tax & interest, that was in the context of s. 271(1)(c) which required the AO to record his satisfaction in the course of the assessment proceedings itself. As there is no such requirement in s. 271 AAA, there is no outer limit for payment of the due tax & interest. On facts, as the assessee had paid the due tax & interest within the time specified in the s. 156 notice of demand, s. 271AAA penalty was not imposable.