No penalty for undisclosed income if it is not mandatory to fill details of assets & liabilities in ITR

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No penalty for undisclosed income if it is not mandatory to fill details of assets & liabilities in ITR

Shiv Bhagwan Gupta
[2021] 125 taxmann.com 306 (Patna – Trib.)

Short Overview of the Case:

The assessee is an individual and has earned income from partnership firm and interest income.
The assessee has neither earned any business income nor earned any income exceeding Rs. 50 lakhs so as to require mandatory filing of personal assets and liabilities or to maintain books of account.
Even the assessee is not required to otherwise disclose any such income to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search.
The alleged income is not any income represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course.
• Penalty under section 271AAB can be initiated in respect of undisclosed income as defined in section 271AAB itself found during search action, independent of assessment proceedings.
Though, fact in a case that assessee has been able to explain source of alleged ‘undisclosed income’ may be relevant for final imposition of penalty, however, for initiation of penalty proceedings, provisions of section 271AAB are self-contained and are not dependent upon commencement or finalization of assessment proceedings.
 It is not mandatory for Assessing Officer to invoke provisions of section 271AAB in each and every case of levy of penalty pursuant to search action.
 There is no bar to Assessing Officer to initiate penalty proceedings under section 271(1)(c) even in cases involving search actions if in facts and circumstances of case, it is so warranted.
Only bar is that no penalty under provisions of section 270A or section 271(1)(c) shall be imposed in respect of undisclosed income, as defined under section 271AAB unearthed during search action carried out under section 132.

Conclusion :

For levy of penalty under section 271AAB, case must fall within four corners of definition of expression ‘undisclosed income’ as defined under section 271AAB itself;

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