M/S STAR GLOBAL ENDURA LTD.,JAIPUR vs. ACIT, CENTRAL CIRCLE-3, JAIPUR, JAIPUR

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ITA 1260/JPR/2026Status: DisposedITAT Jaipur26 October 2026AY 2018-1910 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

For ITA No. 1260/JPR/2026 (AY 2018-19), the Tribunal held that the declaration of income under Section 153A is a condition for a lower penalty rate under Section 271AAB(1A)(a), not a basis for deletion. The Tribunal, referencing K. Krishnamurthy v. DCIT, found that the cash consideration for scrap sales, evidenced by loose papers and admissions, met the definition of 'undisclosed income' under Explanation (c) to Section 271AAB, as it represented income found in the course of search and not recorded in books. The previous year was a specified previous year under Section 271AAB(1A)(b). Thus, the penalty of Rs. 3,43,031 was confirmed. For ITA No. 1272/JPR/2026 (AY 2016-17), the Tribunal held that once the CIT(A) found the sustained addition to be part of the declared income, no addition survived over the returned income. As no penalty was initiated on the declared income of Rs. 6,50,000, and the AO did not invoke Explanation 5A to Section 271(1)(c), the penalty was not sustainable. Furthermore, based on the CIT(A)'s formula, the tax sought to be evaded was nil under Section 115JB. The penalty of Rs. 2,49,197 was directed to be deleted.

What were the facts?

The Assessee, Star Global Endura Limited, filed appeals against penalty orders for Assessment Years (AY) 2016-17 and 2018-19. The penalties were levied by the Assessing Officer (AO) under Section 271AAB(1A)(b) and Section 271(1)(c) of the Income Tax Act, 1961, respectively, following a search under Section 132 on July 9, 2018. During the search, cash was found, and the key person admitted to unrecorded cash sales of scrap. The Assessee declared additional income in returns filed under Section 153A. The AO made additions based on an estimated cash component, which was later restricted by the CIT(A). The appeals challenge the confirmation of penalties by the CIT(A) on these additions.

What were the issues?

1. Whether the penalty levied under Section 271AAB(1A)(b) for AY 2018-19 is sustainable when the addition is covered by income declared in the return under Section 153A, and no penalty proceedings were initiated on such declared income, and if the sum constitutes 'undisclosed income' as per Explanation (c) to Section 271AAB. Assessee's arguments: The addition is covered by declared income on which no penalty was initiated. An estimate does not constitute undisclosed income. Relied on Rekha Goyal v. ACIT. Revenue's arguments: Unaccounted cash, loose papers, and admissions were found. Distinguished Rekha Goyal and relied on PCIT v. Sandeep Chandak. 2. Whether the penalty levied under Section 271(1)(c) for AY 2016-17 is sustainable on an addition that was part of income declared in the return under Section 153A, on which no penalty was initiated, and whether the tax sought to be evaded is nil under Section 115JB. Assessee's arguments: No addition survives over returned income; no penalty was initiated on declared income. Relied on PCIT v. Neeraj Jindal. Revenue's arguments: Disclosure was not voluntary. Relied on MAK Data (P.) Ltd. v. CIT.

Which sections of the Income-tax Act were involved?

Section 271AAB(1A)(b),Section 271(1)(c),Section 132,Section 132(4),Section 131,Section 153A,Section 154,Section 271AAB(1A)(a),Section 271AAA,Section 271AAB,Section 139(1),Section 115JB,Section 153A(1)(a),Section 139

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH, JAIPUR

Before: Shri Kuldip Singh & Shri Prakash

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, JAIPUR (PHYSICAL HEARING) Before: Shri Kuldip Singh, Judicial Member And Shri Prakash, Accountant Member

ITA Nos: 1260 & 1272/JPR/2026 Assessment Years: 2016-17 & 2018-19

Star Global Endura Limited ACIT, 137-138 Industrial Area, Central Circle-03, Jhotwara, Jaipur Vs Jaipur PAN: AANCS3446G (Respondent) (Appellant)

Assessee Represented: Sh. P. C. Parwal, CA Revenue Represented: Mrs. Arti Rawat, JCIT Date of hearing : 05-10-2026 Date of pronouncement : 26-10-2026 आदेश/ORDER

PER : PRAKASH, ACCOUNTANT MEMBER:-

1.

These two appeals by the Assessee are directed against two separate orders of the learned Commissioner of Income Tax (Appeals), Jaipur-4 [hereinafter referred to as “the learned CIT(A)”], both 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 271AAB(1A)(b) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2018-19 (ITA No. 1260/JPR/2026) and under section 271(1)(c) of the Act for the assessment year 2016-17 (ITA No.

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd 1272/JPR/2026). As both the penalties arise from the same search and the same issue, the appeals were heard together and are disposed of by this consolidated order.

2.

There is a delay of 37 days in filing each of these appeals. The assessee has filed applications for condonation supported by the affidavit of its Director. It is stated that, as the learned CIT(A) had granted part relief, the Director believed that no further appeal was required, and that the appeals were filed after the assessee’s Chartered Accountant advised otherwise on 15.04.2026. We are satisfied that the delay is short and not deliberate, and that there was sufficient cause for it. The delay in both the appeals is condoned and the appeals are admitted for hearing.

3.

The grounds of appeal raised by the Assessee before us in the memoranda of appeal in Form No. 36 read as under:

ITA No. 1260/JPR/2026 “1. The Ld. CIT(A) has erred on facts and in law in confirming the levy of penalty of Rs.3,43,031/- u/s 271AAB(1A)(a) of IT Act, 1961 on the addition of Rs.11,43,437/- by not appreciating that after the quantum appeal, no such addition remained as covered by income of Rs.11.50 lacs offered by the assessee in the return of income for which no penalty proceedings was initiated and the addition so made/ income declared do not fall within the definition of undisclosed income as per Explanation (c) to section 271AAB of the Act.

2.

The appellant craves to alter, amend and modify any ground of appeal.

3.

Necessary cost to be awarded to the assessee.”

ITA No. 1272/JPR/2026 “1. The Ld. CIT(A) has erred on facts and in law in confirming the levy of penalty of Rs.2,49,197/- u/s 271(1)(c) of IT Act, 1961 on the addition of Rs.6,45,434/- by not

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd appreciating that after quantum appeal, no such addition remained as covered by income of Rs.6,50,000/- offered by the assessee in the return of income on which no penalty proceedings u/s 271(1)(c) was initiated.”

Ground Nos. 2 and 3 in this appeal are identical to those in ITA No. 1260/JPR/2026.

4.

Briefly stated, the facts of the case are that the assessee, a manufacturer of multifilament yarn, belongs to the Supreme Group, Jaipur, which was searched under section 132 of the Act on 09.07.2018. Cash of Rs 1,41,330 was found with Shri Lal Singh Sisodia, who stated that it was generated from sales of scrap of the group companies. Shri Sanjay Jain, the key person of the group, stated under section 132(4) of the Act that about 30% of the consideration for scrap was received in cash and was not recorded, and in his statement under section 131 of the Act on 13.07.2018 furnished the details of the unrecorded sales of scrap of the assessee. Loose papers recording both the bill amount and the cash amount of certain sales of scrap were also seized. In the returns filed under section 153A of the Act, the assessee declared additional income “as per statement u/s 132(4)”. The AO estimated the cash component at 55% on the basis of one loose paper; the learned CIT(A) restricted it to 30% in the quantum appeals; and the AO, by orders under section 154 of the Act, gave credit for the declared income. The relevant figures are as under:

Particulars A.Y. 2018-19 (ITA A.Y. 2016-17 (ITA 1260) 1272) 26,68,020 15,06,011 Sales of scrap recorded in the books (Rs) Addition by the AO at 55% (Rs) 32,60,913 18,40,680 Addition sustained by the learned 11,43,437 6,45,434 CIT(A) at 30% (Rs) 11,50,000 6,50,000 Additional income declared in the return under section 153A (Rs)

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd

Particulars A.Y. 2018-19 (ITA A.Y. 2016-17 (ITA 1260) 1272) Section 271(1)(c) Penalty initiated in the assessment Section order under 271AAB(1A)(b) Penalty levied by the AO (Rs) 6,86,062 4,00,290 Penalty disputed before us (Rs) 3,43,031 2,49,197

ITA No. 1260/JPR/2026: section 271AAB of the Act

5.

The AO levied penalty at 60% under clause (b) of section 271AAB(1A) of the Act on Rs 11,43,437. The learned CIT(A) held that the sum was undisclosed income but, as it was covered by the income admitted and declared, restricted the penalty to 30% under clause (a). The learned Authorised Representative (hereinafter referred to as “the learned AR”) submitted that the sum stood covered by the declared income of Rs 11,50,000 on which no penalty was initiated, that no document relating to the assessee was found and that an estimate is not undisclosed income, relying on Rekha Goyal v. ACIT (ITA No. 483/JPR/2026).

The learned Departmental Representative (hereinafter referred to as “the learned DR”) relied on the orders below, submitted that unaccounted cash, loose papers and admissions of the key persons were found, distinguished Rekha Goyal (supra) as a case of inferred stock shortage, and relied on PCIT v. Sandeep Chandak [2018] 93 taxmann.com 405 (All).

6.

We have heard the rival contentions and perused the record. The first contention, that the income was declared in the return and no penalty was initiated on it, does not appeal to us. Clause (a) of section 271AAB(1A) of the Act applies precisely where the assessee admits the undisclosed income under section 132(4) of the Act, substantiates its manner, pays the tax and declares it in the return. Such declaration is a condition for the lower rate, not a ground fordeletingthe levy. The AO initiated proceedings under 4

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd section 271AAB of the Act on the issue of unrecorded sales of scrap in paragraph 7.9 of the assessment order, and the sum declared and the sum sustained are the cash component of the same sales at the same ratio of 30%. The relief under section 154 of the Act only avoids double taxation. Indeed, before the learned CIT(A), the assessee itself pleaded that it fulfilled all the conditions of clause (a). Having secured the lower rate on that footing, it cannot approbate and reprobate.

7.

The second contention is that the sum is not undisclosed income as defined in clause (c) of the Explanation to section 271AAB of the Act, sub-clause (i) of which covers income represented by any money or any 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 books before the date of search. On the identical definition in section 271AAA of the Act, the Hon’ble Supreme Court in K. Krishnamurthy v. DCIT [2025] 473 ITR 557 (SC) held in paragraphs 34 and 41 as under:

“34. The expression ‘Undisclosed Income’ has been defined in Explanation (a) appended to Section 271AAA of the Act 1961. This Court is of the view that as Section 271AAA is a penalty provision, it has to be strictly construed. The fact that the assessee has surrendered some undisclosed income during the course of search or that the surrender is emerging out of the statements recorded during the course of search is not sufficient to fasten the levy of penalty. The onus is on the Assessing Officer to satisfy the condition precedent stipulated in the said Explanation, before the charge for levy of penalty is fastened on the assessee.

41.

Further, this Court is of the opinion that the expression ‘found in the course of search’ is of a wide amplitude. It does not mean documents found in the assessee’s premises alone during the search. At times, search of an assessee leads to a search of another individual and/or further investigation/interrogation of third parties. All

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd these steps and recoveries therein would fall within the expression ‘found in the course of search’.”

8.

Tested on these principles, the sum answers the definition. It is the cash consideration for sales of scrap, an inflow of funds. Its existence was not inferred but found: cash generated from scrap sales, loose papers recording the cash part of such sales, and the admission of the key person under section 132(4) of the Act followed by the details of the assessee’s unrecorded sales furnished four days after the search. The billed part of those sales was recorded in the books; the cash part was not. This is income represented by transactions found in the course of the search and not recorded in the books. Only its quantum was estimated, at the very ratio admitted by the key person and adopted by the assessee itself.

This is the situation expressly carved out in paragraph 14 of Rekha Goyal (supra), which reads as under:

“14. We are conscious of the reasoning of the learned CIT(A) that the application of the gross profit rate was only a mode of quantification which does not dilute the character of the income. That reasoning would hold good where the existence of the undisclosed income is otherwise established by material found in the search and it is only the quantification which is estimated. In the present case, however, it is not merely the quantum but the very existence of the unrecorded sales which rests upon an inference drawn from the physical inventory. The distinction is material, because the definition in the Explanation to section 271AAB of the Act attaches to what is found, and not to what is inferred from what is not found.”

The search here did not merely suggest a figure; it uncovered a practice. As for Sandeep Chandak (supra), against which the special leave petition was dismissed in Sandeep Chandak v. PCIT [2018] 93 taxmann.com 406 (SC), we have not treated the levy as automatic, in

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd view of the later judgment in K. Krishnamurthy (supra), but have tested the sum against the statutory definition.

9.

The previous year ended on 31.03.2018, before the search on 09.07.2018, and on the date of search, the time for furnishing the return under section 139(1) of the Act for that year had not expired and no return had been furnished. It is, therefore, a specified previous year within the meaning of clause (b) of the Explanation to section 271AAB of the Act. Accordingly, we hold that Rs 11,43,437 is ‘undisclosed income’ of that year. The learned CIT(A) has already applied the lower rate under clause (a), and the Revenue is not in appeal. The penalty of Rs 3,43,031 is confirmed and Ground No. 1 is dismissed.

Ground No. 2 is general. Ground No. 3, seeking costs, is unsupported and is rejected.

ITA No. 1272/JPR/2026: section 271(1)(c) of the Act

10.

In paragraph 7.9 of the assessment order, the AO initiated the penalty “in this issue of furnishing inaccurate particular of income”, that is, on the addition of Rs 18,40,680. In the penalty order, however, the AO levied penalty on Rs 12,95,434, being the declared income of Rs 6,50,000 and the sustained addition of Rs 6,45,434. The learned CIT(A) held that the sustained addition formed part of the declared income and upheld the levy, but directed recomputation on the basis of the tax payable under section 115JB of the Act. Paragraph 4.2 of the impugned order records as under:

“Therefore, the computation of penalty is required to be aligned with Explanation 4(iv) to section 271(1)(c). Since the final tax liability of the appellant is governed by the provisions of section 115JB, the tax sought to be evaded has to be computed with reference to MAT, i.e., the difference between the tax payable on the assessed book

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd profit and the tax that would have been payable had the concealed income not been included in such book profit.”

The learned AR submitted that no addition survives over the returned income and that no penalty was initiated on the declared income, relying on PCIT v. Neeraj Jindal [2017] 393 ITR 1 (Del). The learned DR submitted that the disclosure was not voluntary, relying on MAK Data (P.) Ltd. v. CIT [2013] 358 ITR 593 (SC).

11.

We have heard the rival contentions and perused the record. Once the learned CIT(A) held that the sustained addition forms part of the declared income, and the AO gave effect to it under section 154 of the Act, no part of the addition survives over the returned income. What remains is only the income of Rs 6,50,000 declared in the return under section 153A of the Act. No satisfaction was recorded on that income; it was accepted as returned and was brought into the penalty only in the penalty order. The AO also did not invoke the deeming fiction in Explanation 5A to section 271(1)(c) of the Act. Under section 153A(1)(a) of the Act, that return is treated as a return under section 139 of the Act.

The Hon’ble Delhi High Court in Neeraj Jindal (supra) held in paragraph 21 as under:

“21. Thus, it is clear that when the A.O. has accepted the revised return filed by the assessee under Section 153A, no occasion arises to refer to the previous return filed under Section 139 of the Act. For all purposes, including for the purpose of levying penalty under Section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. In fact, the second proviso to Section 153A(1) provides that “assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate.” What is clear from this is that Section 8

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the A.O. accepts the revised return filed under Section 153A, the original return under Section 139 abates and becomes non-est. Now, it is trite to say that the “concealment” has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139.”

The sum of Rs 6,50,000 was shown on the face of that return as additional income. A penalty for concealment presupposes something concealed. MAK Data (P.) Ltd. (supra) does not help the Revenue, as there the income was surrendered after the return, added in the assessment and made the subject of a recorded satisfaction; the voluntariness of the disclosure is therefore not the test here.

12.

Further, on the very formula laid down by the learned CIT(A), the tax sought to be evaded is nil, because the income was assessed under section 115JB of the Act and nothing on record shows that either sum was ever included in the book profit. The disputed sum of Rs 2,49,197 is, in fact, the same as the tax under section 115JB of the Act which the assessee itself declared and paid with the return (pages 4 and 6 of the paper book). The penalty is, therefore, not sustainable and the AO is directed to delete it. Ground No. 1 is allowed, and the plea on estimation is left open as academic.

Ground No. 2 is general. Ground No. 3, seeking costs, is unsupported and is rejected.

ITA Nos. 1260 & 1272/JPR/2026 M/s Star Global Endura Ltd 13. In the result, the appeal filed by the Assessee in ITA No. 1260/JPR/2026 is dismissed and the appeal filed by the Assessee in ITA No. 1272/JPR/2026 is partly allowed. Order pronounced in the open court on 26.10.2026

Sd/- Sd/- (KULDIP SINGH) (PRAKASH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 26/10/2026 *Ganesh Kr., Sr. PS आदेशक���त�ल�पअ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT Ganesh Digitally signed by 4. CIT (A) Ganesh Kumar Kumar 5. DR, ITAT Date: 2026.11.02 11:41:10 +05'30' 6. Guard file. By order/आदेश से, सहायक पंजीकार आयकर अपील�य अ�धकरण, t;iqj

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