2016 (9) TMI 1443 - AT - Income Tax

Penalty u/s 271AAA - During search operations at the residential premises, cash and jewellery were found and seized - Held that - The assessee derived only income from salary and has admitted undisclosed income without specifying the manner in which the said income has been derived and has also not substantiated the manner. Hence the assessee clearly falls under the ambit of aforesaid provision of the Act. Section 273B does not include section 271AAA from cases where the penalty can be waived on attribution of reasonable cause. No infirmity in the orders of the authorities below and confirm the levy of penalty. - Decided against assessee.

Summary

Issues:
Levy of penalty under section 271AAA of the Income Tax Act for undisclosed income.

Analysis:
The appeal was against the order confirming the penalty of Rs. 2,66,700 levied by the Assessing Officer (AO) under section 271AAA of the Income Tax Act. The AO observed that the assessee's returned income included an income of Rs. 26,67,000 on account of excess gold and diamond jewellery found during search operations. The assessee admitted to the excess jewellery during a statement under section 132(4) but did not disclose the manner of earning it. The CIT(A) upheld the penalty, stating that the assessee failed to disclose and substantiate the manner of earning the undisclosed income. The appeal was then brought before the ITAT.

During the ITAT proceedings, the counsel for the assessee argued against the penalty, citing various case laws. However, the ITAT noted that the assessee did not specify or substantiate the manner in which the undisclosed income was earned, as required by section 271AAA. The case laws cited were found to be inapplicable to the current situation as they were based on different facts or sections of the Act.

The ITAT highlighted that in cases where the penalty can be waived, the assessee must admit the undisclosed income, specify the earning manner, and substantiate it. In this instance, the assessee failed to meet these requirements. The ITAT differentiated the present case from previous judgments where the income was disclosed in the books of accounts or related to business activities, unlike the current situation where the assessee only earned salary income.

Ultimately, the ITAT found no merit in the arguments presented and confirmed the levy of the penalty under section 271AAA. The appeal filed by the assessee was dismissed, upholding the penalty imposed by the authorities.

In conclusion, the ITAT's decision was based on the assessee's failure to comply with the requirements of section 271AAA regarding disclosure and substantiation of undisclosed income. The judgment emphasized the specific conditions that must be met to avoid the penalty and clarified the distinction between the present case and previous rulings cited during the proceedings.