To unearth the undisclosed income, tax authorities generally conduct search at the premises of the taxpayer. Section 132 provides the circumstances in which the tax authorities can initiate a search. If a search has been initiated and any undisclosed income is unearthed in the search, then penalty can be levied under section 271AAB. The quantum of penalty under section 271AAB shall be as follows:
1) 10% of undisclosed income of the specified previous year if taxpayer admits the undisclosed income, substantiates the manner in which such income was derived, and on or before the specified date pays the tax, together with interest thereon and furnishes the return of income for the specified year declaring such undisclosed income.
2) 20% of undisclosed income of the specified previous year if taxpayer does not admit the undisclosed income, but on or before the specified date declares such income in the return of income furnished for the specified previous year and pays the tax, together with interest thereon.
3) 60% of undisclosed income of the specified previous year, if it is not covered by (1) or (2) discussedearlier.