Section 271AAB of the Income Tax Act, 1961 deals with the penalty provisions. As per the said section, the penalty is payable on undisclosed income found during the search proceedings initiated under section 132 of the Income Tax Act.

Section 271AAB contains two sub-section (1) and (1A). The applicability of both the sub-sections are explained hereunder –

  • Section 271AAB (1) is applicable to the cases, wherein, the undisclosed income was found during the search which had been initiated on or after 1st July 2012 but before 15th December 2016 [i.e. date on which the Taxation Laws (Second Amendment) Bill, 2016 received the President’s assent].
  • Section 271AAB (1A) is applicable to the cases, wherein, the undisclosed income was found during the search being initiated on or after 15th December 2016.

The existing applicable provisions of section 271AAB sub-section (1A) is being taken up and explained in the present article.

Penalty

Coverage of provisions of section 271AAB (1A) of the Income Tax Act –

Penalty provisions of section 271AAB (1A) apply under the following situation –

1. The search proceedings have been initiated, against the assessee, under section 132 of the Income Tax Act.

2. Such a search has been undertaken on or after 15th December 2016.

3. Undisclosed income has been recorded during the search proceedings.

4. The Assessing Officer has directed the assessee for payment of penalty under section 271AAB (1A) of the Income Tax Act.

If all the above conditions are satisfied and the Assessing Officer directs the assessee, then, the assessee would be liable to pay the penalty under section 271AAB (1A). The quantum of penalty payable is explained below.

Amount of penalty payable under section 271AAB (1A)

The penalty amounts payable under section 271AAB (1A) of the Income Tax Act is summarized in the table presented herein below –

Particulars Penalty amount
Cases, wherein, the following conditions are satisfied –

  • The assessee during the search, in a statement, admits the undisclosed income. The assessee also specifies the manner in which the undisclosed income has been derived.
  • The assessee validates the manner in which the undisclosed income was derived.
  • The assessee pays the required tax, along with interest, in respect of the undisclosed income on or before the specified date.
  •  The assessee furnishes the income tax return for the specified previous year declaring the undisclosed income on or before the specified date.
30% of the undisclosed income of the specified previous year.
Any other case 60% of the undisclosed income of the specified previous year.

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