No Penalty u/s section 271AAB when Search Proceedings u/s 132 were not initiated on assessee: ITAT

The assessee being an individual derives income from business and other sources. Pursuant to a search and seizure operation under section 132 of the Act carried out in the case of M/s Gold Sukh Safety Vaults Ltd which is involved in the business of providing lockers on rent to various persons, cash of Rs.15 lakhs was found in a locker in the name of the assessee. Assessing Officer made the addition of Rs.15 lakhs in the hands of the assessee as unexplained cash and penalty proceedings were initiated under section 271AAB of the Act. The AO then levied the minimum penalty of Rs. 4,50,000 at the rate of 30% of the undisclosed income under section 271AAB of the Act.

Appeal before CIT(A): Aggrieved by the impugned order, the assessee preferred to appeal before the Ld. CIT(A) confirmed the order of the assessing officer.

Appeal before ITAT: Aggrieved the assessee is in appeal before the tribunal against the order of the Ld. CIT(A).

The tribunal is of the view from the facts that no search has been conducted on the assessee per se under section 132 of the Act. The provisions of section 271AAB warrant that upon search under section 132 of the Act, any undisclosed income, if identified, will be the prima facie requirement to levy penalty under section 271AAB. The present case in hand does not satisfy the prima facie requirement as search was conducted in M/s Gold Sukh Safety Vaults Ltd and not on the assessee. It was pointed out that it is pertinent to note that section 271AAB mandates that a search has to be initiated to levy penalty.

It was held that penalty cannot be levied in the present case as the mandatory search proceedings were not initiated on the assessee under section 132 so 271AAB is not applicable in assessee’s case. Therefore, the appeal filed by the assessee was allowed.

To Read Judgment Download PDF Given Below: