K. Krishnamurthy vs Deputy Commissioner Of Income Tax 2025 INSC 208 - S 271AAA Income Tax Act

Income Tax Act 1961 - Section 271AAA - The expression ‘Undisclosed Income’ -The fact that the assessee has surrendered some undisclosed income during the course of search or that the surrender is emerging out of the statements recorded during the course of search is not sufficient to fasten the levy of penalty. The onus is on the Assessing Officer to satisfy the condition precedent stipulated in the said Explanation, before the charge for levy of penalty is fastened on the assessee. 35. Consequently, it is obligatory on the part of the Assessing Officer to demonstrate and prove that undisclosed income of the specified previous year was found during the course of search or as a result of the search. (Para 34) the expression ‘found in the course of search’ is of a wide amplitude. It does not mean documents found in the assessee’s premises alone during the search. At times, search of an assessee leads to a search of another individual and/or further investigation/interrogation of third parties. All these steps and recoveries therein would fall within the expression ‘found in the course of search’. (Para 41) Though under Section 271AAA(1) of the Act 1961, the Assessing Officer has the discretion to levy penalty, yet this discretionary power is not unfettered, unbridled and uncanalised. Discretion means sound discretion guided by law. It must be governed by rule, not by humour, it must not be arbitrary, vague and fanciful. (Para 31)