Jasraj Changalal Jain Vs DCIT (ITAT Mumbai)
Search Surrender Doesn’t Mean Maximum Penalty: ITAT Cuts Section 271AAB Levy from 90% to 30%
The Mumbai ITAT granted substantial relief to an assessee by reducing penalty under Section 271AAB from a harsh 90% to 30%, holding that the AO cannot mechanically impose the maximum penalty without recording extraordinary reasons.
During a search under Section 132, cash of over ₹33 lakh was found from the assessee’s premises. In his statement recorded under Section 132(4), the assessee admitted that the cash belonged to him and accepted it as undisclosed income. The amount was later declared in the return filed pursuant to the search.
The AO nevertheless imposed penalty at the maximum rate of 90% under the residuary clause of Section 271AAB(1)(c), alleging that the assessee failed to substantiate the manner in which the undisclosed income was earned.
The Tribunal held that the assessee indeed failed to explain and substantiate the source of cash and therefore could not claim the concessional 10% penalty under Section 271AAB(1)(a). However, the ITAT simultaneously observed that once the assessee admitted ownership of the cash and offered it to tax, imposition of the maximum penalty rate required special justification.
The Bench noted that the statute itself prescribes a range of 30% to 90% under clause (c), and the AO had failed to specify any exceptional circumstances warranting the harshest possible penalty. Accordingly, the ITAT directed the AO to restrict the penalty to the minimum prescribed rate of 30% instead of 90%.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
