2025 (10) TMI 78 - AT - Income Tax

Penalty under section 271AAB(1A) deleted where search statement alone cannot sustain 30% undisclosed income levy

ITAT DELHI (AT) allowed the appeal and deleted the penalty under section 271AAB(1A) levied at 30% of undisclosed income. The tribunal held that a search ... Penalty u/s 271AAB(1A) - Addition @ 30% of the undisclosed income declared in the assessee’s search statement recorded u/s 132(4) - HELD THAT:- We invited Revenue’s attention to section 271AAB explanation (c) wherein the legislature as stipulated sub-clauses (i) and (ii) that such a penalty based on the specific seized material then a mere search statement which has itself been held as not carrying any significance in the CBDT circular 10th March, 2003. We thus adopt stricter interpretation as per CIT Vs. Dilip Kumar and Co. & Ors. [2018 (7) TMI 1826 - SUPREME COURT (LB)] to hold that the impugned penalty is not sustainable in law. The same is directed to be deleted. Assessee’s instant appeal is allowed. Assessment-year 2017-18 appeal against CIT(A)'s order upholding penalty under section 271AAB(1A) was heard. The Assessing Officer imposed a penalty of Rs. 2,40,000 (30% of undisclosed income) based on the assessee's search statement recorded under section 132(4) during a search on 21.08.2017. Attention was drawn to explanation (c) to section 271AAB, which distinguishes penalties based on 'specific seized material' from mere search statements; the CBDT's 10 March 2003 circular was noted as treating search statements as not carrying significance. Applying a stricter interpretation and relying on CIT v. Dilip Kumar & Co. & Ors. [2018] 9 SCC 1 (SC) (FB), the tribunal held that a penalty founded solely on the search statement cannot be sustained. Consequently, 'the impugned penalty is not sustainable in law' and the penalty was deleted.