Rohan M. Thakkar, Legal Heir of Late Mahesh N. Thakkar v. DCIT (ITAT Mumbai)
Where unreconciled jewellery is admitted as undisclosed income during search, the concessional penalty rate under Section 271AAB(1)(a) may apply when the disclosure is substantively complied with, even though the income was omitted from the original return but included in a revised return before completion of assessment.
Summary: The ITAT Mumbai considered whether jewellery valued at ₹29,75,000 found during a search under Section 132 constituted undisclosed income under Section 271AAB and, if so, whether penalty was leviable at 10% under Section 271AAB(1)(a) or at 30% under Section 271AAB(1)(c). During the search on 18 November 2015, jewellery aggregating to ₹3,71,28,639 was found at residential premises and bank lockers, of which jewellery weighing approximately 1,250 grams and valued at ₹29,75,000 could not be reconciled with wealth-tax returns, valuation reports or other contemporaneous records. In his statement under Section 132(4), the assessee admitted that the jewellery was unrecorded and offered ₹29,75,000 as income. Although the amount was inadvertently omitted from the original return, it was included in a revised return filed on 30 November 2017 before completion of assessment on 29 December 2017, and the corresponding tax was paid. The Assessing Officer levied penalty at 30% under Section 271AAB(1)(c), amounting to ₹8,92,500, which was confirmed by the CIT(A). The Tribunal held that the jewellery constituted undisclosed income because it was found during the search, remained unreconciled and was specifically admitted under Section 132(4). However, it found substantive compliance with Section 271AAB(1)(a), noting that the asset and undisclosed income were specifically identified, the income was admitted during the search, tax was paid and the amount was subsequently included in the revised return before completion of assessment. The Tribunal held that the residuary clause could not be invoked mechanically merely because of the initial omission from the original return. The penalty was therefore restricted to 10%, reducing it from ₹8,92,500 to ₹2,97,500, and the appeal was partly allowed.
