Voluntary disclosure of income does not absolve the assessee from penalties under Section 271(1)(c) and 271AAB: Pune ITAT.

The Key Issues before Pune Tribunal in the case of Shreehari Associates Pvt. Ltd. v. DCIT (ITA No 407/Pun/2024) was regarding Penalty under Section 271(1)(c) for furnishing inaccurate particulars of income for AY 2013-14 and 2014-15 & also Penalty under Section 271AAB for undisclosed income for AY 2019-20.

Background:
Shreehari Associates Pvt. Ltd. is a construction company involved in various infrastructure projects.
A search action under Section 132 of the Income Tax Act was conducted on August 21, 2018, revealing that the company had claimed subcontract expenses without awarding actual subcontracts.
The company admitted to surrendering 12% of the unexplained sub-contract expenses as undisclosed income during the search.

Assessment and Penalty Proceedings:
For AY 2019-20, the company filed its return including the surrendered income. The Revenue adjusted the unexplained subcontract expenses across the relevant assessment years (2013-14, 2014-15, and 2019-20) based on the matching accounting principle.
The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for AY 2013-14 and 2014-15 and under Section 271AAB for AY 2019-20.

First Appellate Authority:
The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalties imposed by the AO, leading to the Revenue’s appeal to the ITAT.

Revenue’s Arguments:
The Revenue argued that the penalties were justified as the additions were based on seized documents and the company’s failure to prove the genuineness of the subcontract expenses.
The Revenue cited the Supreme Court’s decisions in K P Madhusudhanan v. CIT and UOI v. Dharmendra Textiles Processor to support the imposition of penalties.

Assessee’s Arguments:
The assessee contended that the additions were based on estimates and that the penalties were not warranted.
The assessee relied on the Supreme Court’s decision in Sir Shadilal Sugar & General Mills Ltd. v. CIT and other judicial precedents to argue against the penalties.

Tribunal’s Analysis:
The Tribunal noted that the assessee failed to produce key documents to substantiate the genuineness of the subcontract expenses.
The Tribunal found that the penalties were justified as the additions were based on seized materials and the assessee’s inability to prove the genuineness of the expenses.
The Tribunal held that the voluntary disclosure of income does not absolve the assessee from penalties under Section 271(1)(c) and 271AAB.

The copy of the order is as under:

1733398395402