Penalty where search has been initiated.

1. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 12[but before the 1st day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent. of the undisclosed income of the specified previous year. 3. The words “, without reasonable cause,” omitted by Act 46 of 1986, s. 20 (w.e.f. 10-9-1986). 5. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). which was substituted as “Deputy Commissioner (Appeals)” for “Appellate Assistant Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988) and the words and brackets “or the Commissioner (Appeals)” were inserted after “Appellate Assistant Commissioner” by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 1-4-1977). 8. Section 271AA renumbered as sub-section (1) thereof by Act 28 of 2016, s. 102 (w.e.f. 1-4-2017).
2. (2) Nothing contained in sub-section (1) shall apply if the assessee,—
   • (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
   • (ii) substantiates the manner in which the undisclosed income was derived; and
   • (iii) pays the tax, together with interest, if any, in respect of the undisclosed income.
3. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1).
4. (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.—For the purposes of this section,—
   • (a) “undisclosed income” means—
     • (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has—
   • (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or
   • (B) otherwise not been disclosed to the 1[Principal Chief Commissioner or Chief Commissioner] or 2[Principal Commissioner or Commissioner] before the date of search; or
     • (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted;
   • (b) “specified previous year” means the previous year—
     • (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or
     • (ii) in which search was conducted.]

¹ Ins. by Act 41 of 1975, s. 62 (w.e.f. 1-4-1976).

² Ins. by Act 28 of 2016, s. 101 (w.e.f. 1-4-2017).

⁴ Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).

⁶ Subs. by Act 14 of 2001, s. 87, for “a sum which shall not be less than two thousand rupees but which may extend to one hundred thousand rupees” (w.e.f. 1-6-2001).

⁷ Subs. by Act 23 of 2012, s. 98, for section 271AA (w.e.f. 1-7-2012).

⁹ Ins. by s. 102, ibid. (w.e.f. 1-4-2017).

¹⁰ Subs. by Act 23 of 2012, s. 99, for “international transaction” (w.e.f. 1-4-2013).

¹¹ Ins. by Act 22 of 2007, s. 77 (w.e.f. 1-4-2007).

¹² Ins. by Act 23 of 2012, s. 100 (w.e.f. 1-4-2012).

¹ Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013).

² Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013).