Kolkata bench of the Income Tax Appellate Tribunal, in DCIT v. Shri Ravi Kumar Khaitan, held that penalty under section 271AAA of the Income Tax Act is not leviable when assessee has admitted his undisclaosed income during the course of search proceedings and offered it to tax.
In the present case, the department conducted search operations in the business and residential premises of the assessee. During the course of search, assessee surrendered an additional income of Rs. 1.5 crores and offered it to tax. Subsequently, the department initiated penalty proceedings under section 271AAA of the Income Tax Act.
Assessee challenged the penalty proceedings by contending that since the income was voluntarily admitted, penalty is not leviable.
Analyzing the definition of the term ‘undisclosed income’ under section 271AAA of the Income Tax Act, the bench noted that, as per the explanation, undisclosed income is the income of the specified previous year which is represented by any money, bullion, jewellery or other valuable article or things or any entry in the books of account or other documents or transactions found in the course of search which has not been recorded in the books of account on or before the date of search.
In further noticed that in the assessment order, there is no finding of the AO that in the case of assessee there was anything found in the course of search which was not recorded in the books of account.
“We are of the opinion that merely for the reason that the assessee had admitted additional income in the course of search for taxation, it cannot be said that such admitted income was undisclosed income within the meaning of ‘undisclosed income’ provided in Explanation to section 271AAA of the Act to impose the penalty. We concur with the Ld. CIT(A) that when the income disclosed u/s 132(4) in the course of search, itself cannot be treated as undisclosed income within the meaning or undisclosed income as provided in Explanation to 271AAA of the Income Tax Act, the same cannot be treated as undisclosed income to impose the penalty under that section.”
Read the full text of the Order below.