Penalty in Case of Undisclosed Income
What Constitutes Unexplained Income?
Unexplained income includes cash credits, investments, expenditures, money, or amounts borrowed or repaid on hundi, where the assessee fails to explain their nature or source satisfactorily.
When is Penalty Levied?
• Penalty may be imposed by the Assessing Officer, Joint Commissioner (Appeals), or Commissioner (Appeals) if unexplained income forms part of assessed income and explanation is inadequate.
• Penalty is not levied if the income qualifies as under-reporting or misreporting under Section 270A, or the assessee declares the unexplained income in return and pays tax under Section 115BBE before the relevant year-end.
Quantum of Penalty
Penalty is 10% of the tax payable on such unexplained income.