The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that income surrendered during search and seizure cannot be treated as an undisclosed, deleted penalty under Section 271AAB of the Income Tax Act, 1961.
The assessee is engaged in business manufacturing, trading, and export of precious &semi-precious stones from the last several years. A search under Section 132 of the Income Tax Act took place at the residence and business premises of the assessee.
In the course of the search, the assessee surrendered an income of Rs.25,00,000/-on account of land advance which he admitted as his additional business income for the current year.
The assessee filed an original return declaring a total income of Rs. 89,40,360/- which included said additional income of Rs.25,00,000/- offered to tax in the course of the search.
The Assessing Officer initiated penalty proceedings under Section 271AAB of the Income Tax Act. The penalty proceedings initiated by him under Section 271AAB of the Income Tax Act by issuing fresh show cause notice(s) to which the assessee filed his explanation.
During the course of the hearing, the Authorized Representative of the assessee prayed that the lower authorities have erred in sustaining the penalty of Rs.2.50 lacs under Section 271AAB of the Income Tax Act for which the Authorized Representative of the assessee filed a detailed written submission concerning the issue in question.
It was noted from the records that the Department had carried out the search and seizure operation on the assessee group and thus did not find any evidence which could show that the assessee was having undisclosed income and the Authorized Representative submitted that the revenue authorities had exerted undue pressure and obtained surrender of income from the assessee.
The practice of confession of the additional income during search and seizure operation does not serve any useful purpose and there should be concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Department.
A recent judgment of ITAT Jaipur Bench in the case of Rajendra Kumar Gupta vs DCIT in ITA No. 359/JP/2017 dated 18-01-2019 finds favour in the case of the assessee.
The two-bench member comprising of Sandeep Gosain (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that the income surrendered is not an undisclosed income as specified in Explanation (c) of Section 271AAB of the Income Tax Act.
Thus, the appeal of the assessee was allowed.
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