M/S SIDHARTH POLYSACKS PVT. LTD.,JAIPUR vs. ACIT, CENTRAL CIRCLE-3, JAIPUR, JAIPUR

These three appeals by the Assessee are directed against three separate orders of the learned Commissioner of Income Tax (Appeals), Jaipur-4 [hereinafter referred to as "the learned CIT(A)"], all dated 09.01.2026, arising out of the penalty orders dated 27.06.2025 passed by the Assessing Officer (hereinafter referred to as "the AO") under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the assessment year 2016-17 and under section 271AAB(1A)(b) of the Act for

There is a delay of 37 days in filing each of these appeals. The Assessee has filed condonation applications supported by affidavits of its director. It is stated that, as the learned CIT(A) had granted part relief in each year, the director believed in good faith that no further appeal was needed, and that the appeals were filed after the Assessee's chartered accountant advised otherwise. Having considered the same, we are satisfied that there was sufficient cause for the delay. Accordingly, the delay is condoned and the appeals are admitted for hearing.

The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 for the assessment year 2018-19 (ITA No. 1271/JPR/2026) read as under:

The grounds for the assessment year 2019-20 (ITA No. 1269/JPR/2026) are identical, the penalty challenged being Rs 90,000 under clause (a) on

Briefly stated, the facts of the case are that the Assessee, a manufacturer of HDPE/PP woven sacks and fabrics, belongs to the Supreme Group, Jaipur, on which a search under section 132 of the Act was carried out on 09.07.2018. Cash of Rs 1,41,330 found with Shri Lal Singh Sisodia was explained by him as generated from scrap sales of the group companies. Shri Sanjay Jain, a key person of the group, admitted in his statement under section 132(4) of the Act that the group companies received about 30% of the scrap sale consideration in cash outside the books, quantified it on that basis from 01.04.2015, and later furnished the details of the Assessee's unrecorded scrap sales in a statement under section 131 of the Act. A seized loose paper (page 36 of Exhibit 1), which the Assessee accepted as relating to its own sales to Sadguru Plastic Industries over about three weeks in September 2017, recorded billed sales of Rs 15,97,249 and cash of Rs 18,80,703. Another paper related to Parmar Plastics, which the Assessee disowns.

Relying on these papers, the AO estimated the unrecorded cash at 55% of the scrap sales. The Assessee had declared income on this account in its returns, filed in response to notices under section 153A of the Act for the assessment years 2016-17 and 2018-19, and under section 139(1) of the Act for the assessment year 2019-20. In the quantum appeals, the learned 3

The learned Authorised Representative (hereinafter referred to as "the learned AR") submitted that no penalty proceedings were initiated on the income declared in the returns; that the sustained additions are estimates falling outside clause (c) of the Explanation to section 271AAB of the Act; that the Parmar Plastics paper does not relate to the Assessee; and that, for the assessment year 2018-19, penalty could at most be computed on Rs 6,30,703 (being the cash of Rs 18,80,703 in the Sadguru paper less Rs 12,50,000 declared).

The learned Departmental Representative (hereinafter referred to as "the learned DR") relied on the orders of the authorities below and submitted that the additions are founded on seized documents and the admissions under sections 132(4) and 131 of the Act, and that the disclosure in the returns was a consequence of the search and not voluntary. Rekha Goyal (supra) was distinguished as a case of a mere stock mismatch, whereas here cash and sheets recording cash receipts on scrap sales were found. Reliance was placed on Pr. CIT v. Sandeep Chandak [2018] 93 taxmann.com 405 (Allahabad) and MAK Data (P.) Ltd. v. CIT [2013] 358 ITR 593 (SC).

We have heard the rival contentions and perused the material available on record. We first take up ITA Nos. 1271 and 1269/JPR/2026 under section 271AAB of the Act. It is not in dispute that the assessment years 2018-19 and 2019-20 are specified previous years. Under clause (c) of the Explanation to the section, "undisclosed income" means income of the specified previous year represented, "either wholly or partly", by any money, valuable article, entry in the books of account or other documents "or transactions found in the course of a search", which has not been recorded in the regular books or otherwise disclosed before the search. The Hon'ble Supreme Court in K. Krishnamurthy v. DCIT [2025] 473

Tested on this touchstone, the income before us answers the definition. It is the cash component of scrap sales, an inflow which never entered the Assessee's books. Its existence rests on what was found in the course of the search: the cash with Shri Lal Singh Sisodia, the Sadguru paper showing cash in excess of the billed amount, and the admission of Shri Sanjay Jain under section 132(4) of the Act specifying the manner in which the income was derived, followed by the details furnished under section 131 of the Act. The Assessee itself offered income on this very account in its returns. Only the quantum was estimated, and that too at the rate the Assessee had admitted. Estimation here fixes how much; it does not decide whether.

The plea that no penalty proceedings were initiated on the declared income is also without merit. The AO initiated proceedings under section 271AAB(1A)(b) of the Act on the addition for unrecorded scrap sales, and the penalty in appeal is computed on that addition as finally sustained. The learned CIT(A) treated the declared income as part of the sustained addition and applied the lower rate under clause (a) to it. That direction reduced the penalty; it did not enlarge its base. Clause (a) itself presupposes that the undisclosed income has been admitted in the search and declared in the return, so a declaration does not take the income out of the section. Having sought and obtained the benefit of clause (a) before the learned CIT(A), the Assessee cannot now contend that the same income lies outside the section altogether. A party cannot approbate and reprobate.

The alternative plea for the assessment year 2018-19 cannot be accepted either. The Sadguru paper covers only about three weeks of sales. It corroborates the practice admitted for the whole period; it is not the measure of the undisclosed income of the year. The income sustained is represented by the admitted transactions and, in part, by the seized paper, which is all that the words "either wholly or partly" require. For the assessment year 2019-20, the objection to the Parmar Plastics paper does not alter the position, since the sustained income rests on the admitted rate applied to the sales of the period before the search, and the Assessee itself offered Rs 3,00,000 on this account.

The computation directed by the learned CIT(A) follows the scheme of the statute. The income declared in the returns (Rs 12,50,000 and Rs 3,00,000) has been charged at 30% under clause (a). The balance (Rs 27,28,291 and Rs 1,03,234) was not declared in the returns, so the condition in item (B) of sub-clause (iii) of clause (a) is not met and clause (b) applies. We are conscious that the word "may" vests a discretion and that the levy is not automatic, but no circumstance has been shown to justify withholding the penalty on undisclosed income so found, and no error in the computation is pointed out. We find no infirmity in the orders of the learned CIT(A). Ground No. 1 in ITA Nos. 1271 and 1269/JPR/2026 is dismissed.

In ITA No. 1270/JPR/2026 for the assessment year 2016-17, the Assessee declared income of Rs 99,63,640 in its original return and Rs 1,19,63,640 in the return filed under section 153A of the Act, which included additional income of Rs 20,00,000. The AO initiated penalty proceedings in the assessment order both on the addition and on the Rs 20,00,000 declared, so the ground that no proceedings were initiated on the latter is not correct on facts. That question, however, no longer survives, because the learned CIT(A) has deleted the penalty on the Rs 20,00,000 and the Revenue is not in appeal.

What remains is the penalty on the sustained addition of Rs 19,61,979. In the order under section 154 of the Act giving effect to the appellate order, the AO set off the Rs 20,00,000 declared against this addition and determined the income at Rs 1,19,25,615, which is lower than the income returned under section 153A of the Act. Nothing has thus been assessed beyond the return. The learned CIT(A) himself held that "the addition sustained by the ld. CIT(A) may be considered part of additional income offered by the assessee". Having so held, he could not sustain a penalty on the same sum, for that would penalise the very income which the Assessee had returned. The Hon'ble Delhi High Court in Neeraj Jindal (supra) held in paragraph 21 as under:

Judged against the return filed under section 153A of the Act, there is neither concealment of income nor furnishing of inaccurate particulars for this year. MAK Data (P.) Ltd. (supra) does not help the Revenue, because there the sum was surrendered during the assessment proceedings and had not been included in the return, whereas here it formed part of the very return against which concealment is to be judged. We, therefore, direct the AO to delete the penalty under section 271(1)(c) of the Act for the assessment year 2016-17. The plea that the addition rests on estimation does not then call for adjudication. Ground No. 1 is allowed, Ground No. 2 is general in nature and Ground No. 3, seeking costs, is rejected.

In the result, the appeals filed by the Assessee in ITA Nos. 1269/JPR/2026 and 1271/JPR/2026 are dismissed, and the appeal filed by the Assessee in ITA No. 1270/JPR/2026 is partly allowed.