TaxTMI 
TaxTMI 
2025 (12) TMI 794
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.... income of Rs. 8,23,530/-. However, the assessee re-filed return in response to notice issued by AO u/s. 153A after search, declaring a total income of Rs. 10,28,200/- after declaring an "additional income" of Rs. 2,04,670/-. While completing assessment, the AO accepted the total income of Rs. 10,28,200/- declared by assessee without any variation. Thus, there was no dispute between assessee and AO for taxation of additional income. However, the AO initiated proceeding for imposition of penalty u/s. 271AAB qua the additional income of Rs. 2,04,670/- through show-cause notice dated 11.12.2019. Ultimately, the AO passed penalty-order dated 18.01.2021 imposing a penalty of Rs. 1,22,802/- (rounded off to Rs. 1,22,800/-) equal to 60% of "additional income". Aggrieved, the assessee carried matter in first-appeal to CIT(A) and made a detailed submission. The CIT(A) reduced quantum of penalty from 60% to 30% and allowed part-relief. Still aggrieved, the assessee has come in next appeal before us challenging the orders of lower-authorities. 3. Ld. AR for assessee carried us to the assessment-order, penalty-order, order of first-appeal and the documents filed in paper-book. He submitted t....
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....e has concealed the same in original return, and (ii) had there been no search, the assessee would have not disclosed such additional income and the same would have been evaded. Ld. AR contended that while making such observations, the AO has travelled beyond the scope and ambit of section 271AAB. To show this, Ld. AR carried us to the relevant portion of section 271AAB reading as under: "(1A) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, if the assessee- (i) in the course of the search, in a statement under sub- section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) Substantiates the manner in which the undisclosed income was derived; and ....
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....erm "undisclosed income" has also been defined by Parliament in Explanation (c) to section 271AAB itself. The said Explanation [re-produced in preceding para and emphasised in bold letters] prescribes that "undisclosed income" means (i) any income represented by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search u/s. 132, or (ii) any income represented by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course which is found to be false and would not have been found to be so had the search not been conducted. He submitted that in present case of assessee, the AO has simply assessed the "additional income" already included by assessee in the return of income and moreover the said "additional income" was in the form of 'taxable portion of maturity receipt of life insurance' and 'bank interest'. Ld. AR contended that the additional income offered by assessee is neither represented by 'any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or ....
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....me represented by any entry in respect of an expense recorded in the books of account or documents .....". Therefore, there has to be an entry of 'expense' in order to attract sub-clause (ii). Since in present case, the 'additional income' offered by assessee in the form of 'taxable portion of maturity proceed of life insurance' and 'bank interest' is not an entry of 'expense', the sub-clause (ii) is not applicable at all. 9. We have considered rival contentions of both sides and perused the case-record. We have also examined the provisions of section 271AAB as noted above. The learned Representatives of both sides are ad idem that for levy of penalty u/s. 271AAB, the existence of "undisclosed income" is must. Then, the limited question which calls for our adjudication is whether or not the 'additional income' of Rs. 2,04,670/- offered by assessee in the return filed in response to notice u/s. 153A consisting of 'taxable portion in maturity proceed of life insurance' and 'bank interest' falls within the definition of 'undisclosed income' as prescribed in clause (c) of Explanation to section 271AAB? The AO was influenced to impose penalty taking into account aspects that the asse....