Whether assessee has to substantiate manner in which income is derived to avoid penalty u/s 271AAA?

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Whether provisions of section 50C are applicable when price of land is fixed by bank & not assessee?

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Short note of today's case law for quick reference:

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[2024] 467 ITR 183 (Del)

[IN THE DELHI HIGH COURT]

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SSA INTERNATIONAL LTD.

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ASSISTANT COMMISSIONER OF INCOME-TAX AND ANOTHER

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YASHWANT VARMA and PURUSHAINDRA KUMAR KAURAV JJ.

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May 9, 2024.

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1. From a reading of section 271AAA(2), it is manifest that a general amnesty from the imposition of penalty under section 271AAA is dependent not only on disclosure of income having been made in the course of a statement recorded u/s 132(4) but the assessee is also obligated to specify the manner in which that income had been derived and thereafter substantiate the disclosure.

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2. The assessee surrendered additional income of Rs. 21 crores in a search conducted on him on 11.12.2009.

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3. It is also not in dispute that in the return filed by the assessee for the A.Y. 2010-11, the assessee declared undisclosed income of Rs. 21 crores which includes Rs. 9.25 crores on account of excess stock and Rs. 11.75 crores as income from other sources in the computation of income annexed with the tax return.

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4. It is also not in dispute that the assessee has expressed his inability to explain certain seized documents rather stated that those may be included to form part of the amounts surrendered during the search and seizure operation.

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5. It is also not in dispute that the assessee has already paid tax together with interest on the surrendered income of Rs. 21 crores.

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6. The CIT(A) deleted the penalty on the premise that if no specific question was put to assessee u/s 132(4), it cannot be concluded that the assessee has failed to reply or specifically substantiate the manner of concealment.

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7. It is a settled principle of law that the assessee has to specify the manner in which income has been derived and substantiated the manner in which the undisclosed income was derived at the time of search in its statement recorded u/s 132(4) and not thereafter.

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8. The facts of the cases goes to prove that assessee has shown his inability to reconcile the discrepancy in the stock found and failed to substantiate the manner in which the income has been derived by the search team during the course of search, however has made the disclosure only in order to buy peace of mind and avoid litigation.

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9. So, we are of the considered view that the assessee has failed to satisfy the condition laid down in section 271AAA(2) so as to get general amnesty u/s 271AAA(2) because the assessee has neither specified the manner nor substantiated the manner in which the undisclosed income was derived.

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10. From the reading of section 271AAA(2), it becomes manifest that an escape from the imposition of penalty is dependent not only on the disclosure of income having made in the course of statement u/s 132(4) but the assessee also stands obligated to specify the manner in which Income had been derived and thereafter substantiate the said disclosure.

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11. So, High Court upheld the penalty.