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Facts
A search and seizure action was conducted on the assessee group, and an additional income of Rs. 6,00,00,000/- was disclosed. Subsequently, the assessee filed its return based on regular income, deviating from the disclosed amount. The Assessing Officer imposed a penalty under Section 271AAB(1A)(b) of the Act.
Held
The Tribunal held that the penalty under Section 271AAB(1A)(b) of the Act can only be levied on undisclosed income unearthed during a search, not on additional income offered during the course of search if no incriminating material was found. The penalty was wrongly imposed as there was no unearthing of undisclosed income.
Key Issues
Whether penalty under Section 271AAB(1A)(b) is leviable on additional income disclosed during search when no incriminating material was found, and the disclosure was subsequently retracted or not reflected in the return.
Sections Cited
132, 139(1), 143(2), 143(3), 271AAB, 271AAB(1A)(b)
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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI S. RIFAUR RAHMAN
The instant appeal, preferred by the Revenue, is directed against the order dated 31.08.2022 in Appeal No. CIT(A), Delhi-23/1005/2017-18, passed by the order dated 25.03.2022 passed by the Assessing Officer DCIT, Central Circle-4, New Delhi, under Section 271AAB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for assessment year 2018-19.
Facts of the case leading to the instant appeal are that the assessee was subjected to search and seizure action under Section 132 of the Act which was carried out in the SMC group of cases on 21.11.2017 for A.Y. 2018-19 at 4-654, Bomanji Road, Saharanpur, U.P. The assessee filed its original return of income under Section 139(1) of the Act on 24.09.2018 declaring total income of Rs. 16,50,72,480/-. Consequent to search initiated against the assessee, the case of the assessee was picked for compulsory scrutiny and statutory notice under Section 143(2) of the Act was served upon the assessee. The scrutiny assessment was finalized by accepting the returned income at Rs. 16,50,72,480/-. However, during the course of search Shri Mool Chand Agarwal, Chairman of SMC Group of Companies disclosed additional income of Rs. 40,00,00,000/- as additional income in addition to regular income of all group companies, individuals, firms and other family members out of which Rs. 6,00,00,000/- was offered on behalf of the assessee for A.Y. 2018-19. Subsequently, the assessee filed its return of income for A.Y. 2018-19 on the basis of only regular income earned through the business operation and no such additional income has been found in the balance sheet and in the deposition on oath under Section 132(4) as the case made out by the Revenue and therefore the provisions of Section 271AAB(1A)(b) of the Act was found to be applicable and penalty proceedings were initiated. The penalty proceeding was ultimately finalized by imposing penalty of Rs. 1,80,00,000/- on undisclosed income of Rs. 6,00,00,000/- as admitted during the course of search, as is the case of the Revenue, which was deleted by the Learned CIT(A) in the appeal preferred by the assessee. Hence, the instant appeal before us filed by the Revenue.
We heard the rival submissions made by the respective parties and also perused the relevant materials available on record. The assessing Officer in fact imposed the impugned penalty by observing that the additional income of Rs. 6,00,00,000/- was embodied in the return of income itself and thus penalty under Section 271AAB(1A)(b) of the Act on the basis of additional income offered during the course of search. In that view of the matter the question before us is as to whether the penalty under Section 271AAB(1A)(b) of the Act can at all be levied on additional income offered during the course of search or not. At the time of hearing of the instant appeal learned Counsel Mr. Madhur Agarwal vehemently opposed the appeal preferred by the Revenue and supported the order passed by the Learned CIT(A) on the ground that the penalty 271AAB(1A)(b) of the Act is leviable on the undisclosed income and not on the additional income. In this regard there was no existence of any incriminating material found or unearthed during the course of search. However, the penalty 271AAB(1A)(b) of the Act has been levied on undisclosed income whereas the word ‘undisclosed income’ has been defined in Explanation (c) to Section 271AAB(1A)(b) of the Act which has already been taken into consideration by the Learned CIT(Appeals) in para 13 of its order itself.
In the case in hand having regard to this fact of there being no income which represented by any money, bullion, jewellery or other valuable article or thing or any false entry in the books of account or any entry in respect of an expense recorded in the books of account recorded in the order passed by the Learned Assessing Officer under Section 143(3) of the Act, further that no material suggests that any income received by the assessee has not been declared by the assessee in its return and furthermore, the penalty order suggests that the Assessing Officer was mainly on the fact of retracting the assessee’s statement of line of disclosure as made during the course of search the imposition of penalty under Section 271AAB(1A)(b) of the Act cannot be held justified.
On the other hand, the Learned DR relied upon the penalty order passed by the Assessing Officer in imposing penalty against the assessee. record placed before us it is found that no incriminating material was unearthed during the course of search and the statement recorded during the course of search of Shri Mool Chand Agarwal of offering Rs. 6,00,00,000/- additional income, has not been reflected in the return of income filed for A.Y. 2018-19 rather the same was on the basis of regular income through regular business operation. As no such additional income has been found in the balance sheet and as such the assessee company deviated the line of disclosure Rs. 6,00,00,000/- as found during under Section 132(4) of the Act on 21.11.2017 the Learned Assessing Officer imposed penalty under Section 271AAB(1A)(b) of the Act. Under such facts and circumstances of the matter we have further considered the provisions of law which specifically imposes the condition of unearthing of undisclosed income in the course of search or as the result of search conducted under Section 132 of the Act as sine qua non for invoking the penalty provision under Section 271AAB(1A)(b) of the Act in the absence of which merely on the basis of the admission made by the assessee under Section 132(4) which was subsequently retracted and particularly in the absence of any direct material during the search which leads and establishes the fact of receiving any income by the assessee and further that which has not been declared by the assessee the imposition of penalty under Section 271AAB(1A)(b) of the Act is found to have not being supported by any provision of law and, therefore, not sustainable in the eyes of law and thus, rightly deleted by the Learned CIT(Appeals) which does not warrant any interference. The appeal, therefore, filed by the Revenue is found to be devoid of any merit and thus, dismissed.
Order pronounced in open court on 23.12.2025.