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I-T - Undisclosed business receipts, which are not recorded in books but found during search, is undisclosed income & attracts penalty: ITAT

By TIOL News Service

JAIPUR, DECEMBER 22, 2018: THE ISSUE IS - Whether undisclosed business receipts, which are not recorded in the books of accounts and found as a result of search, is undisclosed income as defined in section 271AAB and penalty is rightly levied on the same. YES IS THE VERDICT.

Facts of the case

The assessee is a civil contractor. A search was conducted in the case of MRS Group to which the assessee belonged and in response to the notice issued u/s 153A, the assessee filed its return of income for the relevant year. In the return so filed, the assessee, declared an additional income of Rs. 96,50,946/- on account of undisclosed business receipts. As per AO, the additional income so declared by the assessee was duly covered under the provisions of Section 69A of the Act as unaccounted money, which are not recorded in the books of accounts and assessee had failed to offer any explanation about the source of the same. Accordingly, the same was brought to tax u/s 115BBE(1)(a) liable for tax @ 30%. The assessment was completed u/s 143(3) r.w.s. 153A of the Act. The AO also initiated penalty proceeding by issuance of notice u/s 271AAB r.w.s. 274 of the Act and imposed penalty of Rs. 40,57,188. On appeal, CIT(A) upheld the order of AO.

Tribunal held that,

++ the search has been initiated and conducted on the assessee on 17.07.2013 and the due date of filing of return of income has not expired on the date of search and the assessee has not filed its return before the date of search. The assessee has filed its return of income pursuant to issuance of notice u/s 153A which has been assessed under section 143(3) r/w 153A of the Act. The penalty proceedings have been validly initiated by issuance of notice under section 274 read with section 271AAB of the Act;

++ regarding undisclosed business income of Rs. 96,50,946/-, it is noted that the same has been disclosed by the assessee in its return of income based on documents/loose papers found and impounded during the course of search and listed as per AS-1 to AS-26 of seized documents. These are documents regarding various business receipts and payments of the assessee not reflected in its regular books of accounts so these are clearly unrecorded transactions which have not been recorded in the books of accounts regularly maintained by the assessee before the date of search. Further, we have gone through the the submission of the assessee made before the DCIT during the course of assessment proceeding dated 16.02.2016 and it is noted that in its submission, the assessee has said very clearly that there is very close & inextricable linkage between the receipts and payments slips and therefore, the difference between the receipt totals of loose slips & payment totals amounting to Rs. 96 Lacs and odd has been surrendered and offered as income for the assessments year 2013-14 and which has subsequently been accepted by the AO. Therefore, as far as the said undisclosed business receipt (net of expenditure) is concerned, the same is clearly within the meaning of "undisclosed income" found as a result of search and which has not been recorded in the books of accounts maintained in the normal course relating to previous year relevant to impugned assessment year.

(See 2018-TIOL-2469-ITAT-JAIPUR)


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