Penalty Penalty where search has been initiated A search and seizure operation u/s 132(1) was carried out at business premises of M/s. I along with assessee’s residential premises During search, income on account of jewellery and relating to property transaction/advance for properties given, was surrendered on behalf of assessee, before ADIT(Investigation) Assessee filed return of income declaring total income which included surrendered income AO completed assessment u/s 143(3) after making addition for unexplained investment in jewellery and initiated penalty proceedings u/s 271AAA for not disclosing source for investment of amount surrendered CIT(A) restricted addition made by AO ITAT remitted matter to AO for deciding in view of CBDT instruction No. 1916—Pursuant to order of ITAT, AO issued SCN to assessee AO held that assessee failed to specify manner of deriving said income declared against investment in jewellery and property and substantiate it, and accordingly, imposed a penalty u/s 271AAA at rate of 10% of addition CIT(A) was of view that assessee had merely explained application of undisclosed income of and not manner in which undisclosed income was derived CIT(A) observed that no reference or details of any property transaction or evidence regarding ownership of any such property was furnished by assessee either before AO or during Appellate proceedings Held, in view of provisions of s. 271AAA(1), it was evident that AO might levy penalty under said section in case of ‘undisclosed income’ declared during search for specified PY But, if assessee satisfy three conditions of s. 271AAA(2), assessee could save itself from from rigours of s. 271AAA(1) and save itself from penalty For any item of income to be undisclosed income for purpose of s. 271AAA, it must be represented by any money, Bullion, jewellery or other valuable article or thing or any entry in books of accounts or other documents or transaction found in course of search, which was either not been recorded in books of accounts or not disclosed to Department, before date of search Similarly, any item of expense recorded in books of account or other documents if found to be false, same would also be undisclosed income In search proceedings, Sh. J, S/o late Sh A, Director of M/s I made declaration of around Rs.15 crores during course of statement recorded u/s 132(4) Said disclosure was also signed Sh. S, Sh. M and Sh. T But it was not signed by assessee Further, by way of letter, a breakup of said disclosure was provided by Sh. J to ADIT(investigation) for surrender of income against various persons of group First condition of s. 271AAA(2) had two limbs, which had to be satisfied cumulatively First limb was admission of undisclosed income in a statement u/s 132(4) and second limb was specifying manner of deriving said undisclosed income in statement Neither statement dated 05/09/2009 nor letter dated 07/09/2009 was signed by assessee, though statement dated 05/09/2009 was signed by other three persons of group, i.e., Sh. S, Sh. M and Sh. T, have declared/surrendered sum mentioned in detailed letter dated 07/09/2009 From statement of assessee recorded u/s 132(4) and letter filed before ADIT(Investigation), it could not be inferred that assessee had admitted undisclosed income in a statement u/s 132(4) Requirement of law as mentioned s. 271AAA was that assessee should admit undisclosed income, in a statement u/s 132(4) Statement made by another person could not substitute statement by assessee Assessee could not be said to have not satisfied condition of specifying manner of deriving undisclosed income as per s. 271AAA in respect of surrender of amount against investment in property and jewellery respectively—But, if assessee failed to satisfy any one of conditions of s. 271AAA(2), assessee could not escape penalty u/s 271AAA(1) Since, assessee failed to satisfy one limb of first condition of s. 271AAA(2), i.e., admission of undisclosed income in a statement u/s 132(4), assessee was liable for penalty u/s 271AAA Assessee’s appeal dismissed.

SHOBHA SARDANA vs. DEPUTY COMMISSIONER OF INCOME TAX

(2019) 56 CCH 0352 DelTrib