No penalty can be levied u/s 271AAA on the count that assessee failed to substantiate the manner in which undisclosed income was derived if the authorised officer doesn’t ask specific question w.r.t. manner in which such income was derived:

A search action was carried out during the course of which, certain cash, gold ornaments and jewellery were found. Hence, assessee made certain disclosure as his undisclosed income so as to cover the discrepancy in cash & jewellery on which AO levied penalty u/s 271AAA. Hon’ble ITAT observed that the assessee had specified in his statement recorded u/s 132(4) that such income was earned from medical profession. Moreover, the said income was duly offered in the return on income and tax on such disclosure was adjusted from seized cash. AO levied penalty u/s 271AAA since he was of the view that assessee didn’t substantiate the manner in which such income was derived. Hon’ble ITAT further observed that neither at the stage of recording assessee’s statement nor at the stage of assessment proceedings, assessee was asked either by the authorised officer or AO to substantiate the manner in which undisclosed income was derived. Hon’ble ITAT, following decision in the case of Radhakrishnan Goyal vs. CIT [278 ITR 454 (All)], held that u/s 132(4), unless authorised officer puts a specific question w.r.t. manner in which income has been derived, it is not expected from a person to make a statement in this regard. Having complied with the requirements of S.271AAA(2), it was held that assessee was eligible for immunity from penalty u/s 271AAA and CIT(A) was right in deleting such penalty.

[DCIT Vs. Dr. MUKESH S. SHAH – ITA No.1942/Ahd/2012]