RAJKUMAR KHILWANI,,BHOPAL vs. ASSISSTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 2 VBHOPAL, BHOPAL

ITA 912/IND/2025Status: DisposedITAT Indore22 October 2026AY 2013-1427 pages
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What did the Tribunal hold?

For AY 2014-15 (ITA No. 911/Ind/2025), the Tribunal held that the additions sustained by the CIT(A) fell under the mischief of Section 271AAB(1)(c) as they represented undisclosed income discovered upon search. However, considering that the minimum penalty rate at the material time was 30%, the Tribunal modified the penalty from 60% to 30% of the undisclosed income, partly allowing the appeal. The Tribunal rejected the assessee's plea of 'theory of estimation' as it was not empirically proved. For AY 2013-14 and AY 2009-10 (ITA Nos. 912 & 913/Ind/2025), the Tribunal held that the show cause notice clearly stated the charge of concealment of income, and the nature of additions indicated concealment. The reduction of additions by the CIT(A) in the quantum appeal did not negate the charge of concealment. Therefore, the Tribunal upheld the impugned orders and dismissed these appeals. The Tribunal expressly left undecided any issue regarding the specific calculation of the 30% penalty for AY 2014-15, beyond directing it to be the minimum.

What were the facts?

The assessee, Rajkumar Khilwani, filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging orders imposing penalties under Section 271AAB(1)(c) and Section 271(1)(c) of the Income Tax Act, 1961, for Assessment Years (AY) 2014-15, 2013-14, and 2009-10. The penalties stemmed from a search and seizure action under Section 132 on January 29, 2014. The Assessing Officer (AO) imposed penalties based on additions made to the assessee's income, including unexplained cash, foreign travel expenses, and unexplained share capital. The Commissioner of Income Tax (Appeals) [CIT(A)] granted partial relief in the quantum assessment but confirmed certain additions. The AO then initiated penalty proceedings, which were upheld by the CIT(A) in the impugned orders. The assessee's primary contention was that the additions were based on estimation and not on seized material, thus not warranting penalty.

What were the issues?

1. Whether penalty under Section 271AAB(1)(c) of the Act is leviable on additions confirmed by the CIT(A) in the quantum appeal, when the assessee claims these additions were based on estimation and not on seized material, for AY 2014-15. - Assessee's contention: The additions were based on estimation and not on any seized material or documents found during the search, and therefore, no penalty should be imposed. - Revenue's contention: The additions were based on evidence on record, the assessee did not admit undisclosed income under Section 132(4), and did not substantiate the manner of derivation, making Section 271AAB(1)(c) applicable. 2. Whether penalty under Section 271(1)(c) of the Act is leviable for AY 2013-14 and AY 2009-10, considering the specific charge in the show cause notice and the nature of additions confirmed by the CIT(A). - Assessee's contention: The show cause notice was vague and cryptic, and the reduction of additions by the CIT(A) in the quantum appeal meant no concealment of income occurred. - Revenue's contention: The charge of concealment in the show cause notice was specific, and the nature of additions indicated concealment, even if quantum additions were reduced.

Which sections of the Income-tax Act were involved?

Section 253,Section 250,Section 271AAB(1),Section 132,Section 153,Section 143(3),Section 139(1),Section 271(1)(c),Section 246A,Section 132(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI PARESH M JOSHI & SHRI ARVIND SONI

For Respondent: Shri Binay Kumar Rai, Sr.DR
Hearing: 28.09.2026Pronounced: 22.10.2026

Per Paresh M Joshi, J.M:

ITA No:- 911/Ind/2025 ( Assessment Year : 2014-15)

This is an appeal filed by the Assessee under section 253 of the income tax Act 1961,[ hereinafter referred to as the Act

for the sake of brevity] before this tribunal, as & by way of a second appeal .The Assessee is aggrieved by the order in the first appeal No:-CIT (A)-3, Bhopal/IT/10202/2013-14 dated

31.07.

2024 passed by the Ld. CIT(A) u/s 250 of the Act,

which is hereinafter referred to as the “Impugned order”.

RAJKUMAR KHILWANI ITA No. 911, 912 & 913/Ind/2025 - A.Y. 2014-15, 2013-14 & 2009-10 The Relevant Assessment year

The order continues below.

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