Income Tax Act, 1961 – s.271AAA – Penalty where search has been initiated – ‘Undisclosed Income’ – ‘Specified previous year’ – ‘Found in the course of search’ – Search and seizure operation carried out at the appellant’s premises and the appellant disclosed an income of certain amount – Order imposing penalty u/s.271AAA passed against the appellant for AY 2011- 2012 – Another order passed in respect of AY 2010-2011 imposing penalty at the rate of 10% on the entire returned income – Tribunal allowed the application against the Penalty Order in respect of AY 2010- 2011 accepting the appellant’s case that 2009-10 cannot be the ‘specified previous year’ for the purpose of s.271AAA, however the application against the Penalty Order in respect of AY 2011-2012 rejected – Thereafter, the appellant’s appeal rejected by the appellate tribunal as also by the High Court – Correctness: Held: By virtue of explanation b(ii), AY 2011-12-year in which the search was conducted, is the specified previous year for the purpose of s. 271AAA(1) – Appellant admitted Rs.2,27,65,580/- as income for AY 2011-12 during the search as well as substantiated the manner in which the said undisclosed income was derived and paid tax together with interest thereon, albeit belatedly – Thus, all the conditions mentioned in s.271AAA(2) satisfied and penalty u/s.271AAA(1) not attracted on the said amount – Furthermore, expression ‘found in the course of search’ is of a wide amplitude – It does not mean documents found in the assessee’s premises alone during the search – At times, search of assessee leads to a search of another individual and/or further investigation/interrogation of third parties – All these steps and recoveries would fall within the expression ‘found in the course of search’ – Appellant offered Rs.2,49,90,000/- under the head income from other sources on account of these land transactions during the course of assessment proceedings only and not at any time during the search – Since income of Rs.2,49,90,000/- constitutes undisclosed income found during the search-copies of sale deeds collected from the society, penalty u/s.271AAA(1) leviable on the said amount – Also, as the said amount was not admitted in the declaration before the DDIT during the course of search but was disclosed by the appellant only during the assessment proceedings, and that too, after the Assessing Officer had asked for copies of the sale deeds from the Society – Exception carved out in s.271AAA(2) not attracted to the said portion of the income – Appellant to pay penalty at the rate of 10% on Rs.2,49,90,000/- and not on the entire returned income. [Paras 30-43]
Income Tax Act, 1961 – s.271AAA explanation (a) – Expression ‘Undisclosed Income’ – Meaning of:
Held: s. 271AAA is a penalty provision, it has to be strictly construed – Fact that the assessee has surrendered some undisclosed income during the course of search or that the surrender is emerging out of the statements recorded during the course of search is not sufficient to fasten the levy of penalty – Onus is on the Assessing Officer to satisfy the condition precedent stipulated in the said Explanation, before the charge for levy of penalty is fastened on the assessee – Thus, obligatory on the part of the Assessing Officer to demonstrate and prove that undisclosed income of the specified previous year was found during the course of search or as a result of the search. [Paras 34, 35]
Income Tax Act, 1961 – s. 271AAA explanation (b) – Expression ‘specified previous year’ – Meaning of. [Para 36] Income Tax Act, 1961 – s.271AAA – Interpretation of – Explained. [Paras 29-36]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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