The New Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the penalty levied under Section 271AAB of the Income Tax Act, 1961 for alleged undisclosed income during the search. The decision was made due to a lack of clear evidence to prove the allegation.
The revenue conducted a search under Section 132 of the Income Tax Act, 1961, at the premises of Hans Group, which included the assessee, Tanya Jaiswal. The assessee’s assessment proceedings were transferred to Central Circle 31, New Delhi. The AO issued notices under Sections 143(2) and 142(1) through the Income Tax Business Application ITBA.
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In response, the assessee filed her income tax return under Section 139 for the assessment year 2021-2022 declaring Rs.6,54,15,120 as total income on 30.03.2022. The AO completed the assessment under section 143(3) r.w.s 153A of the Income Tax Act by adding Rs. 2,27,000 as unexplained cash commission expense under Section 69C of the Income Tax Act.
From the seized material and records, the AO found that the assessed purchased property was below the fair market value leading to a difference of Rs. 2,27,000 calculated as per Section 50C. The AO further found that the assessee declared bogus LTCG of ₹4,65,00,798 and disclosed cash transactions totaling Rs. 89,50,000 in her ITR.
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The AO concluded that without the search, the assessee would not have been declared and initiated penalty proceedings under Section 271AAB of the Income Tax Act. Aggrieved by the AO’s order, the assessee appealed before the CIT(A). After careful consideration, the CIT(A) held that the AO was incorrect in presuming that the income would not have been declared without the search and AO failed to provide any evidence directly linked to the alleged undisclosed income to incriminating materials from the search. Therefore, the CIT(A) deleted the penalty.
Aggrieved by the CIT(A) decision, the revenue appealed before the New Delhi Bench of ITAT where the revenue’s counsel argued that the additional income declared by the assessee was a result of the search operation, implying that without the search, this income would not have been disclosed. On the contrary, the assessee’s counsel argued that the AO failed to present any concrete evidence substantiating how the disputed amount falls within the definition of undisclosed income as defined under Section 271AAB of the Income Tax Act.
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The two-member bench comprising S.Rifaur Rahman (Accountant Member) and Sudhir Kumar, Judicial Member observed that there was no substantial evidence linking the additional income to incriminating materials found during the search. The tribunal emphasized that for imposing a penalty under Section 271AAB of the Income Tax Act, there must be a clear link between the additional income disclosed and the incriminating evidence found during the search, which was missing in this matter. Therefore, the tribunal upheld CIT(A)’s decision and dismissed the revenue’s appeal
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