INCOME TAX ACT, 1961

Section 271AAB

Penalty under section 271AAB - Leviability - No undisclosed income as per statutory definition found during search -

During search at assessee's premises, certain loose papers and documents were seized which inter alia contained details of commodity dealings by the assessee . With reference to these loose documents, assessee admitted before Investigating authorities that same represented his income aggregating to Rs. 3,16,37,099 for the relevant previous year and therefore, offered the same to tax under the head 'Income from other sources'. AO held that income of Rs. 3 croes assessed by way of profit derived from commodity dealings constituted undisclosed income defined in Explanation (c) to section 271AAB and accordingly, AO levied penalty @ 30% on undisclosed income under section 271AAB. Held: As apparent, Investigating Officers had found loose documents, which contained entries with regard to commodity dealings of assessee, who derived income from other sources and other misc. income. Assessee was required to maintain any books of account in terms of Section 44AA. In the relevant previous year, assessee had conducted non-systematic trades in commodities and therefore, income derived from such transactions was offered to tax in his return of income under the head 'Income from Other Sources'. AO also accepted that such income was assessable under the head 'Other Sources' and assessed it accordingly. In the circumstances when assessee did not carry on business or profession and was, therefore, not required to maintain such books of accounts, then he was required to draw up his statement of income with reference to 'other documents' maintained by him in regular course. Transactions which yielded income, was maintained in the documents and records which was found and seized by the Investigating Officer and it was from these documents only, AO was able to deduce true income and expenditure of assessee. In view of this documents with reference to which income of Rs. 3 crores was assessed in assessee's hands could not be said to be 'incriminating' in nature. Assessee's case fell within in the second limb, i.e., 'or other documents' maintained in normal course as stipulated under section 271AAB, Explanation (c) which described undisclosed income for the purposes of this section. Therefore, income of Rs. 3 crores offered by assessee did not fall within the ambit of 'undisclosed income' as defined in section 271AAB and no penalty could be levied under section 271AAB.

REFERRED :

FAVOUR : In assessee's favour.

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