Undisclosed Income Levy of Penalty on Undisclosed Income Found During the Search : A Most Recent Ruling of Supreme Court

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The Tax Publishers Income Tax--Undisclosed Income Levy of Penalty on Undisclosed Income Found During the Search : A Most Recent Ruling of Supreme Court Akhilesh Kumar Sah Delhi High Court has held in the case of PCIT v. Amul Gabrani (ITA No 1251 of 2018 dated 24-7-2024) that to claim the benefit of the section 271AAA(2) of the Act, assessee has to satisfy the requirements/conditions of the sub-section. The recent judgment of Supreme Court has ended controversy regarding imposition of penalty under section 271AAA of the Act. 1. Introduction The expression 'found in the course of search' is of wide amplitude. Where undisclosed income is found during the search under section 132 of the Act, penalty under section 271AAA(1) of the Income Tax Act, 1961 (for short, 'the Act') is leviable on such amount which is not admitted in the declaration before DDIT(Inv.) during the course of search but is disclosed by appellant only during the assessment proceedings. 2. Analysis Recently, in K. Krishnamurthy v. DCIT [Civil Appeal No. 2411 of 2025 (Arising out of SLP (C) No. 943 of 2023)] decided by the Supreme Court of India on 13-2-2025, a search and seizure operation was carried out at appellant's premises under section 132 of the Act. Appellant had disclosed an income of Rs. 2,27,65,580 as a consequence of the search and seizure. A notice under section 142(1) of the Act was issued to appellant calling for return of income for assessment year (for short, 'AY') 2011-2012. Appellant filed his return of income and returned a total income of Rs.4,77,11,330 for Previous Year (for short, 'PY') 2010- 2011, relevant to assessment year 2011-2012. Respondent issued the assessment order for previous year 2010-2011 relevant to assessment year 2011-2012, in respect of appellant. The total income assessed was Rs.4,78,02,616. The Assessment Order had attained finality. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Undisclosed Income

Levy of Penalty on Undisclosed Income Found During the Search : A Most Recent Ruling of Supreme Court

Akhilesh Kumar Sah

Delhi High Court has held in the case of PCIT v. Amul Gabrani (ITA No 1251 of 2018 dated 24-7-2024) that to claim the benefit of the section 271AAA(2) of the Act, assessee has to satisfy the requirements/conditions of the sub-section. The recent judgment of Supreme Court has ended controversy regarding imposition of penalty under section 271AAA of the Act.

1. Introduction

The expression 'found in the course of search' is of wide amplitude. Where undisclosed income is found during the search under section 132 of the Act, penalty under section 271AAA(1) of the Income Tax Act, 1961 (for short, 'the Act') is leviable on such amount which is not admitted in the declaration before DDIT(Inv.) during the course of search but is disclosed by appellant only during the assessment proceedings.

2. Analysis

Recently, in K. Krishnamurthy v. DCIT [Civil Appeal No. 2411 of 2025 (Arising out of SLP (C) No. 943 of 2023)] decided by the Supreme Court of India on 13-2-2025, a search and seizure operation was carried out at appellant's premises under section 132 of the Act. Appellant had disclosed an income of Rs. 2,27,65,580 as a consequence of the search and seizure.

A notice under section 142(1) of the Act was issued to appellant calling for return of income for assessment year (for short, 'AY') 2011-2012. Appellant filed his return of income and returned a total income of Rs.4,77,11,330 for Previous Year (for short, 'PY') 2010- 2011, relevant to assessment year 2011-2012.

Respondent issued the assessment order for previous year 2010-2011 relevant to assessment year 2011-2012, in respect of appellant. The total income assessed was Rs.4,78,02,616. The Assessment Order had attained finality.