Section 271AAB Income Tax Act
Section 271AAB Income Tax Act seeks to impose a tax penalty on taxpayers where 60% of undisclosed income is found as a result of a search u/s.132 of the Act in relation to the specified previous years. Specified previous years can be understood as the previous year of search and the immediately preceding previous year where the due date for furnishing the return of income u/s.139(1) has not expired on the
date of search. This section only seeks to levy penalty on undisclosed income. The term undisclosed income is defined in the section broadly to mean income represented either wholly or partly by any money, bullion, jewelry or other valuable article or thing or any entry in the books of account or transactions found in the course of search u/s.132, which has not been recorded on or before the date of
search in the books of account or other documents maintained in the normal course or where they are represented either wholly or partly by an entry in respect of an expense recorded in the books or other documents maintained in the normal course which is found to be false and would not be so but for the
search.
On the other hand, section 271(1)(c) seeks to levy a penalty on income that is concealed or where the income added is due to the furnishing of inaccurate particulars of income. Section 271(1)(c) is not applicable from assessment year 2017-18. From the assessment year 2017-18 section 270A seeks to levy penalty on the income that is under-reported. In the context of section 271AAB vis-à-vis section 271(1)(c) a subtle difference has been brought out by the Rajkot Bench of the Income Tax Appellate Tribunal in Shri Atman Rajnikantbhai Bhesdadiya L/R of Late Shri. Rajnikant Bhesdaddiya v DCIT 2023 (12) TMI 978 – ITAT Rajkot. The Rajkot Bench of the Income Tax Appellate Tribunal has held that where the AO makes an estimate of the agricultural income while a higher sum is shown as agricultural income by the assessee, the difference which is added to the income of the year cannot be treated as undisclosed income. While the said income may constitute concealed income, the same cannot be treated as undisclosed income, as
undisclosed income should be represented by money, bullion, jewellery or other valuable articles or things or an unrecorded entry as per documents found or a false entry recorded in the books of account.
Thus, even in a case where the assessee offers income u/s.132(4) but the income does not relate to incriminating material found as a result of the search or where the addition made does not refer to incriminating material, penalty cannot be levied u/s.271AAB. It may be mentioned that if at all penalty is leviable, the same can only be levied u/s.271(1)(c) upto assessment year 2016-17 or u/s.270A from assessment year 2017-18.
