Raja Ram Maheshwari Vs DCIT (ITAT Jaipur)
The appeal concerns the levy of penalty under Section 271AAB of the Income Tax Act, 1961 for Assessment Year 2014-15 following a search conducted under Section 132. The assessee, engaged in the business of manufacturing gold ornaments and jewellery, belongs to the SNG Group. A search and seizure operation was carried out on the assessee’s business and residential premises on 26.02.2014. Subsequently, the assessee filed his income tax return on 22.11.2014 declaring total income of ₹2,59,39,510, including ₹2,58,56,654 disclosed as undisclosed income during the search under Section 132(4). The Assessing Officer (AO) completed assessment under Section 143(3) read with Section 153B(1)(b) on 15.03.2016 and concurrently initiated penalty proceedings under Section 271AAB through a show-cause notice of the same date. Penalty of ₹25,85,665 was imposed under Section 271AAB(1)(a) at 10% of the disclosed undisclosed income.
The assessee contended before ITAT that:
1. The penalty notice was void-ab-initio, issued without proper application of mind and without specifying the relevant limb of Section 271AAB applicable to his case.
2. The penalty under Section 271AAB is not mandatory, but discretionary, and requires examination of facts and circumstances.
3. No undisclosed income was actually found during the search, and surrender of income was made under pressure, violating Board Circulars dated 10.03.2003 and 18.12.2014.
4. The AO did not substantiate the manner in which the income was derived, an essential requirement under Section 271AAB(1)(a)(ii).
5. The Tribunal noted that Section 271AAB provides for penalty in three scenarios:
