PCIT Vs Sandeep Chandak (Allahabad High Court)
These income tax appeals arose from a common order dated 02.01.2017 passed by the Income Tax Appellate Tribunal (ITAT), Lucknow, for the Assessment Year 2014–15, by which penalties imposed under Section 271AAB of the Income-tax Act, 1961 were set aside. The appeals before the Allahabad High Court were filed by the Revenue challenging the ITAT’s decision.
A search and seizure operation under Section 132 of the Act was conducted on 24.10.2013 in the Chandak group of cases. During the search, the assessee’s father surrendered undisclosed income of ₹12 crores on behalf of himself, his wife, and his son, with ₹4 crores attributed to each person. Statements were recorded under Section 132(4), and the surrender was reiterated during assessment proceedings. The assessee explained that the undisclosed income was earned from trading in F&O and derivatives and was advanced for purchase of land.
Based on the surrender, the Assessing Officer initiated penalty proceedings under Section 271AAB and issued a show-cause notice under Section 274 read with Section 271. After considering the replies, penalty of ₹40 lakhs was imposed on each assessee. The Commissioner (Appeals) confirmed the penalties, holding that the conditions of Section 271AAB were satisfied and that the notice, though mentioning Section 271 in the caption, clearly referred to Section 271AAB and caused no prejudice. The Commissioner also applied Section 292BB, noting that the assessee had understood the notice and participated in proceedings.
