Section 271AAB – Relaxation in restrictions to claim the benefit of concessional rate of penalty @ 10%
Issue/Justification
Section 271AAB provides for imposition of penalty at specified rates where search has been initiated. The rate of penalty varies from 10% to 60 % depending on the time when the assessee admits the undisclosed income. Eg Penalty would be levied @ 10% in case assessee admits to undisclosed income during the course of search and makes a statement under section 132(4) along with other conditions like specifying and substantiating the manner of deriving such income at the time search proceeding is going on among other conditions. The aforesaid provisions of section 271AAB are applicable till 15.12.2016 due to insertion of sub-section (1A) vide the Taxation Laws (Second Amendment) Act, 2016.
The benefit of reduced rate of 10% is mostly lost as the assessee is not in a frame of mind to specify and substantiate the manner of deriving such undisclosed admitted income at the time of search. Most assessees are under a state of shock when search is initiated at their premises and turns out to be a drain on their mental well being. The pressures exercised during the course of search makes it impossible for majority of the assessees to comply with the conditions to have the benefit of reduced rate of penalty @ 10%. Further, this provision is in the nature of settlement provision so the harsh and difficult to meet conditions like the one noted above may surely be done away with.
Suggestion
In order to provide the real benefit of imposition of penalty at the reasonably reduced rate of 10% as specified in section 271AAB(1)(a), the conditions as specified in its sub clause (i)w.r.t specifying the manner in which undisclosed admitted income has been derived may be suitably amended and sub clause (ii) w.r.t substantiating the manner in which undisclosed income has been derived may be done away with.
