No Clear Proof of Undisclosed Income: Delhi ITAT Cancels Tax Penalty U/S 271AAB

The penalty has been removed by the New Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) u/s 271AAB of the Income Tax Act, 1961 for alleged undisclosed income during the search. The decision was arrived at because of the clear evidence to prove the allegation.

A search has been conducted by the revenue u/s 132 of the Income Tax Act, 1961, at the premises of Hans Group, which included the taxpayer, Tanya Jaiswal. The assessment proceedings of the taxpayer were transferred to Central Circle 31, New Delhi. Under Sections 143(2) and 142(1) AO has issued the notices through the Income Tax Business Application ITBA.

In answer to that the taxpayer has filed the ITR u/s 139 for the assessment year 2021-2022 declaring Rs 6,54,15,120 as total income on 30.03.2022. AO has finished the assessment u/s 143(3) r.w.s 153A of the Income Tax Act by adding Rs. 2,27,000 as unexplained cash commission expense u/s 69C of the Income Tax Act.

The AO from the seized material and records discovered that the assessed purchased property was less than the fair market value directing to a difference of Rs. 2,27,000 calculated as per Section 50C. AO discovered that the taxpayer has shown a fake Long Term Capital Gain (LTCG) of Rs 4,65,00,798 and disclosed cash transactions totalling Rs. 89,50,000 in her ITR.

It was concluded by the AO that without a search the taxpayer doesn’t declare and initiate the penalty proceedings u/s 271AAB of the Income Tax Act. The order of the AO doesn’t satisfy the taxpayer, thus the taxpayer appealed to the CIT(A).

Post consideration, it was ruled by CIT(A) that the AO was wrong in presuming that the income shall not been declared without the search and AO was unable to furnish any proof related to the alleged undisclosed income to incriminating materials from the search. Subsequently, the penalty has been removed by the CIT(A).

The revenue dissatisfied with the decision of CIT(A) appealed to the New Delhi Bench of ITAT in which the counsel of the revenue claimed that the other income shown by the taxpayer was a consequence of the search operation, directing that without the search the same income shall not have been disclosed.

Opposite to that the counsel of the taxpayer claimed that AO is unable to show any proof substantiating how the disputed amount counted within the ambit of undisclosed income as cited u/s 271AAB of the Income Tax Act.

The two-member bench S.Rifaur Rahman (Accountant Member) and Sudhir Kumar, Judicial Member marked that there was no significant proof linking the additional income to incriminating materials discovered during the search.

It was outlined by the tribunal that to levy a penalty u/s 271AAB of the Income Tax Act, a clear link should be there between the additional income shown and the incriminating proof discovered in the search which was not shown in the same case. Hence the tribunal carried the decision of CIT(A) and dismissed the appeal of the revenue.

Case Title	Tanya Jaiswal Vs DCIT
Citation	ITA No.2148/DEL/2024
Date	06.09.2024
Assessee by	Shri Amit Goel, Shri Pranav Yadav
Revenue by	Shri B.S. Anand
Delhi ITAT	Read Order