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Facts
A search operation led to the discovery of excess gold jewellery, and the assessee's father admitted an amount of Rs.21 lakhs as income. The assessee offered this as additional income and included it in her return. The Assessing Officer (AO) brought this amount to tax under Section 69A read with Section 115BBE.
Held
The Tribunal held that the addition of Rs.21 lakhs, offered voluntarily to buy peace of mind without incriminating material, cannot be taxed under Section 115BBE, but should be taxed at normal rates. Consequently, the penalty levied under Section 271AAB(1A) for "undisclosed income" was not sustainable.
Key Issues
Whether penalty under Section 271AAB(1A) can be levied when no incriminating material was found during search, and the income was voluntarily offered for assessment.
Sections Cited
132, 139(1), 143(2), 142(1), 69A, 115BBE, 143(3), 271AAB(1A), 271, 274
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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri Ravish SoodShri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2019-20) Shri Anne Manoj Chowdary Vs. Dy. CIT Hyderabad Central Circle 1(4) PAN:AINPC5963B Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri Phaneendra Nag, CA राज� व �ारा/Revenue by:: Shri Waseem UR Rehman, Sr. DR सुनवाई की तारीख/Date of hearing: 03/12/2025 घोषणा की तारीख/Pronouncement: 19/12/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.:
This appeal is filed by Shri Anne Manoj Chowdary (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-12, Hyderabad (“Ld. CIT(A)”) dated 10.07.2025 for the A.Y.2019-20. 2. The assessee has raised the following grounds of appeal:
The brief facts of the case are that the search and seizure operation under section 132 of the Income Tax Act, 1961 (“the Act”) was conducted on 05.10.2018 in the cases of various
Page 2 of 7 persons, including the assessee. During the course of the search operation, excess gold jewellery weighing 1390 grams valued at Rs.40,39,700/- was found from the family of the assessee. The assessee’s father, Shri A. Rajeshwar Rao, in his statement recorded under section 132(4) of the Act on 01.12.2018, admitted an amount of Rs.21 lakhs as income in the hands of the assessee. Subsequently, the assessee filed her return of income for the Assessment Year 2019–20 under section 139(1) of the Act on 31.08.2019 admitting a total income of Rs.61,02,790/-, which included Rs.21 lakhs offered as additional income during the course of search. The case of the assessee was selected for scrutiny and notices under sections 143(2) and 142(1) of the Act were issued by the Learned Assessing Officer (“Ld. AO”). During the assessment proceedings, the Ld. AO brought the entire amount of Rs.21 lakhs offered during search to tax by invoking section 69A read with section 115BBE of the Act. The assessment was completed under section 143(3) of the Act vide order dated 09.03.2021. The appeal against the quantum addition of Rs.21.00 lakhs reached this Tribunal, wherein vide order dated 30.08.2023 in this Tribunal held that section 69A read with section 115BBE of the Act would not apply to the addition of Rs.21 lakhs and that the said amount was liable to be taxed under normal rate. Thereafter, on the said amount of Rs.21 lakhs, the Ld. AO initiated penalty proceedings under section 271AAB(1A) of the Act and levied a penalty of Rs.7,20,720/- vide order dated 27.03.2024.
Aggrieved with the penalty order of the Ld. AO, the assessee filed appeal before the Ld. CIT (A). The Ld. CIT(A) upheld the penalty levied by the Ld. AO.
Aggrieved with the order of the Ld. CIT (A), the assessee is in further appeal before this Tribunal. During the appellate proceedings, the Learned Authorized Representative (“Ld. AR”) submitted that the assessee had offered Rs.21 lakhs during the search only to buy peace of mind and had duly included the amount in her return of income filed under section 139(1), paying taxes thereon. The Ld. AR submitted that no incriminating material was found during search in relation to the sum of Rs.21 lakhs. He invited our attention to para nos. 12 to 14 of the Tribunal’s consolidated order on the quantum addition in placed at page nos. 77 & 78 of the paper book, wherein this Tribunal recorded a categorical factual finding that no incriminating material was found for the addition of Rs.21 lakhs, and accordingly directed the Ld. AO to tax the said sum at normal rates. The Ld. AR argued that the levy of penalty under section 271AAB(1A) of the Act presupposes that the income must fall within the definition of “undisclosed income” under clause (c) of the Explanation to section 271AAB of the Act. Since no material, document or evidence was found during the search relating to the said sum, the amount cannot be treated as “undisclosed income,” and hence no penalty is leviable. Accordingly, the Ld. AR prayed before the Bench to delete the penalty levied by the Ld. AO.
Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the order of the lower authorities and submitted that but for the search, the assessee would not have disclosed the income of Rs.21 lakhs. It was therefore argued that the income falls within the sweep of “undisclosed income.”
We have carefully considered the rival submissions and perused the material available on record. We have also gone through para nos. 12 to 14 of the Tribunal’s order in the quantum appeal in placed at page nos. 77 and 78 of the paper book, which is to the following effect:
“12. We, therefore, are of the opinion that merely because the assessee has admitted an amount of Rs.1.00 crore in his hands and in the hands of various family members to buy peace of mind, bringing the amount of the additional income declared by the respective assessees to tax at higher rate as per the provisions of section 115BBE is not justified especially when no other incriminating material was found. In view of the above discussion, we are of the considered opinion that although the additional income declared by the assessee can be brought to tax, however, the same cannot be taxed at special rate under the provisions of section 115BBE. We, therefore, set aside the order of the learned CIT (A) and direct the Assessing Officer to tax the additional income declared at Rs.24.00 lakhs under the normal provisions and not under the provisions of section 115BBE. The grounds raised by the assessee are accordingly allowed.
13. In the result, appeal filed by the assessee is allowed. ITA 176/Hyd/2023 – Shri Anne Manoj Chowdary
14. After hearing both the sides, we find the grounds raised by the assessee in the above appeal are identical to the grounds of appeal in ITA 175/Hyd/2023. Here the assessee has challenged the order of the learned CIT (A) in confirming the action of the Assessing Officer in taxing the additional income declared of Rs.21.00 lakhs at special rate u/s 115BBE. Since we has already decided the appeal in and has held that although the amount can be brought to tax, however, the provisions of section 115BBE are not applicable. Following similar reasonings, the grounds raised by the assessee in the impugned appeal are allowed.”
8. On perusal of the above, it is evident that, this Tribunal has recorded a clear and categorical finding that no incriminating material was found during search for the addition of Rs.21 lakhs. It was on this factual basis that the Tribunal directed the Ld. AO to tax the said sum under the normal rate. We have further examined
Page 5 of 7 the definition of “undisclosed income” as provided under clause (c) of the Explanation to section 271AAB of the Act, which is to the following effect:
“271AAB. (1) ……………… (1A)…… (2)………… (3)…………….. Explanation … (a)……………… (b)………………. (c) "undisclosed income" means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has-- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.”
On perusal of the above, it is abundantly clear that the definition expressly provides that the income must be represented by money, bullion, jewellery or other valuable article or thing, or must be indicated by any entry in books of account or other documents or transactions found during the course of search under section 132 of the Act. Thus, the very foundation for levy of penalty under section 271AAB(1A) of the Act is the existence of incriminating material found during search indicating such income. In the present case, as already recorded by this Tribunal in the quantum proceedings, no incriminating material whatsoever was Page 6 of 7 found for the addition of Rs.21 lakhs. In the absence of such incriminating material, the said amount does not fall within the meaning of “undisclosed income” as defined in the clause (c) of Explanation to section 271AAB of the Act. When the statutory condition is not fulfilled, penalty under section 271AAB(1A) of the Act cannot be sustained. In view of the above factual and legal position, and in conformity with the earlier findings of this Tribunal in the quantum appeal, the Ld. AO is directed to delete the penalty levied under section 271AAB(1A) of the Act in respect of addition of Rs.21 lakhs.
In the result, the appeal of the assessee is allowed.