Penalty on Concealment of Income in Search Cases

Under the Income Tax Act, 1961, if undisclosed income is found during an Income Tax Search (Raid) conducted under Section 132, penalties are levied under Section 271AAB.

1. What is “Undisclosed Income” in Search Cases?

As per Section 271AAB, “undisclosed income” refers to:
✔️ Unaccounted money, assets, or documents found during the search.
✔️ Income that is not recorded in books of accounts and not disclosed before the search.
✔️ False entries or suppression of income detected during the search.

2. Penalty Provisions Under Section 271AAB

The penalty for concealment of income in search cases depends on the circumstances under which the disclosure is made.

📌 Note: If the case falls under Section 271(1)(c) (general penalty for concealment of income) instead of Section 271AAB, the penalty can be 100% to 300% of the tax evaded.

3. Important Considerations

✔️ The penalty is mandatory if undisclosed income is detected in a search.
✔️ If the taxpayer voluntarily discloses the income before the search begins, no penalty is levied.
✔️ If the taxpayer fails to cooperate, the penalty can go up to 90% of the concealed income.

4. How to Avoid Maximum Penalty?

✔️ Voluntarily disclose any unreported income before a search happens.
✔️ Cooperate with tax authorities during the search proceedings.
✔️ File the return on time and pay taxes on undisclosed income.

Final Thought

The penalties under Section 271AAB are severe. If you anticipate any undisclosed income, it’s always better to voluntarily disclose and pay taxes rather than face high penalties and legal action in search cases.