2019 (9) TMI 605 - AT - Income Tax

Tribunal upholds penalty for undisclosed income admission

Sh. Vishal Singal, Smt. Sunita Singal Versus The D.C.I.T., Central Circle-1, Ludhiana.

Sh. Vishal Singal, Smt. Sunita Singal Versus The D.C.I.T., Central Circle-1, Ludhiana. - TMI Issues Involved:1. Levy of penalty under Section 271AAB of the Income Tax Act, 1961.2. Definition and applicability of 'undisclosed income' under Section 271AAB.3. Validity of the penalty imposed based on the surrender of income during search operations.Issue-wise Detailed Analysis:1. Levy of Penalty under Section 271AAB of the Income Tax Act, 1961:The appeals were filed against the orders of the Commissioner of Income Tax (Appeals)-5, Ludhiana, which confirmed the levy of penalty under Section 271AAB. The penalty was levied subsequent to the assessment framed following a search carried out on the Deepak Singal group of cases. The appeals were consolidated and dealt with by a common order due to the identical nature of the issues involved.2. Definition and Applicability of 'Undisclosed Income' under Section 271AAB:During the search conducted under Section 132(1), the assessee admitted to undisclosed income amounting to Rs. 10 lakhs. The penalty proceedings were initiated, and a show-cause notice was issued. The assessee contended that there was no 'undisclosed income' as defined under Section 271AAB and argued that the surrendered income was included in the filed return and taxes were paid. The definition of 'undisclosed income' under Section 271AAB was scrutinized, which includes income not recorded in the books of account or disclosed to the tax authorities before the search. The assessee argued that no incriminating material was found during the search to qualify as 'undisclosed income.'3. Validity of the Penalty Imposed Based on the Surrender of Income During Search Operations:The Assessing Officer (A.O.) and the Commissioner of Income Tax (Appeals) upheld the penalty, stating that the surrender was made to cover discrepancies found in the seized documents and unrecorded income. The Tribunal noted that the surrender letter admitted discrepancies in the books of account and unrecorded entries, which were sufficient to constitute 'undisclosed income.' The Tribunal found no merit in the assessee's contention that no incriminating material was found, as the surrender letter itself was considered incriminating material. The Tribunal also distinguished the present case from other case laws cited by the assessee, where no specific admission of undisclosed income was made.Conclusion:The Tribunal upheld the penalty under Section 271AAB, confirming that the specific admission of undisclosed income and discrepancies in the books of account constituted sufficient incriminating material. Both appeals filed by the assessees were dismissed, affirming the orders of the lower authorities. The judgment emphasized that the specific unretracted admission of undisclosed income during the search was the best evidence against the assessee, justifying the levy of penalty.