When assessee fails to rebut the addition made by the AO in respect of undisclosed income found during the search and also chooses not to file appeal against the huge quantum addition, penalty is warranted in such circumstances

Earth Castle Vs Dy. Commissioner of Income tax (ITAT Mumbai) – Imposition of penalty under s 271(1)(c) is sustainable if the assessee is unable to substantiate an explanation in relation to the addition made by the AO in respect of the undisclosed income found  during the search and also did not file appeal against the addition.

Earth Castle Vs Dy. Commissioner of Income Tax

Decided by- ITAT Mumbai

ITA No. 3064/Mum/2008

Assessment Year: 2006- 07

Decided on- 17.06.2011

ORDER

Per RAJENDRA SINGH (AM).

This appeal by the assessee is directed against the order dated 29.2.2008 of the CIT(A) for the Assessment Year 2006-07. The only dispute raised in this appeal is regarding levy of penalty under section 271(1)(c) for concealment of income.

2. Briefly stated facts of the case are that the assessee firm is a builder and developer which belongs to “Earth Group”. A search has been conducted under section 132 in case of “Earth Group” on 1.9.2005 which also covered the assessee. During the course of search two diaries marked as A-11 and A-12 were found and seized. The partner Shri Bhupesh P. Jain stated on 3.9.2005 that the diary A-11 contained all payments received by the assessee by cheque whereas all cash sale receipts were recorded in the diary A-12.  It was admitted that cash receipts recorded in the diary A-12 were in the nature of on money receipts and payments which were not reflected in the regular books. As regards diary A-11, it was submitted that the transactions were fully recorded in the books. The receipts mentioned in the diary A-12 were declared as undisclosed income in the name of various concerns of “Earth Group”.