RAJESWARA RAO ANNE,HYDERABAD vs. DCIT., CENTRAL CIRCLE-1(4), HYDERABAD

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not quashing the order of the AO levying penalty u/s 271AAB of the Income Tax Act, is absolutely illegal, arbitrary and ab initio void.

On the facts and cireumstances of the case, the Ld. CIT(A) has erred in law in not considering the submissions of the appellant that: (i) Initiation of penalty, by the AO without giving any reasons for initiating penalty u/s 271AAB(IA) of the Income Tax Act is bad in law, (ii) Initiation of penalty, without any speeific finding in the assessment order as to the discovery, as a result of search action, ofany "undisclosed income" within the meaning of clause (c) of explanation to Section 271AAB(1A) of the Income Tax Act, is bad in law. (iii) That initiation of penalty, solely on the basis of offer of additional income voluntarily made for the purpose of buying peace and for avoiding further litigation is bad in law. (iv) That initiation of penalty on the voluntarily offered income without any finding as to requirement to maintain books of account by the Assessing Officer and the Investigation Wing, is bad in law.

On the facts and circumstances of the case. the Ld. CIT(A) has erred in law in not quashing the penalty imposed by the AO without specifying the default prescribed u/s 271AAB(1A) of the Income Tax Act, (i) Ld CIT(A) also erred in law in not quashing the penalty levied on the basis of stereotyped show cause Notice issued u/s 271 read with section 274 of the Income Tax Act which does not mention the spevific default committed by the appellant rendering the appellant liable to penalty under Income Tax Act.

On the facts and circumstances of the case and in law the Ld. CIT(A) erred in upholding the validity of the penalty order by observing that AO has mentioned the main section. (i) The Ld CIT(A) further erred in law in observing that the appellant is well aware of the clause under which its case is covered ignoring the fact that reply of the assessee in compliance does not absolve the AO nor cure the defect in the notice issued. (ii) The Ld. CIT(A) furthher erred in law in holding that no prejudice is caused to the appellant because of not specifying of particular clause which is completely in defiance of the settled legal position which categorically holds that prejudice is on the face ofthe mechanical methods the Revenue adopts in sending a statutory notice.

On the facts and eircumstances of the case and in law the Ld. CIT(A) erred in ignoring the finding of hon'ble Tribunal in appellant's own case on quantum appeal [ITA No175 to 177

The appellant craves leave of the Hon'ble Tribunal to amend OR raise any other ground, cross objection, including any additional ground of appeal not set out in the appeal Memo.”

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 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 in his statement recorded under section 132(4) of the Act on 01.12.2018, admitted income of Rs.24 lakhs. Subsequently, the assessee filed his 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.1,14,75,060/-, which included Rs.24 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.24 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.24 lakhs reached this Tribunal, wherein vide order dated

08.2023 in ITA No.176/Hyd/2023, this Tribunal held that section 69A read with section 115BBE of the Act would not apply to the addition of Rs.24 lakhs and that the said amount was liable to be taxed under normal rate. Thereafter, on the said amount of Rs.24 lakhs, the Ld. AO initiated penalty proceedings under section 271AAB(1A) of the Act and levied a penalty of Rs.8,61,120/- vide order dated 27.03.2024. 4. 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. 5. 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.24 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.24 lakhs. He invited our attention to para no. 12 of the Tribunal’s consolidated order on the quantum addition in ITA No.175/Hyd/2023 placed at page no. 84 of the paper book, wherein this Tribunal recorded a categorical factual finding that no incriminating material was found for the addition of Rs.24 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

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.24 lakhs. It was on this factual basis that the Tribunal directed the Ld. AO to ITA No 1438 of 2025 Rajeswara Rao Anne Page 6 of 7

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 ITA No 1438 of 2025 Rajeswara Rao Anne Page 7 of 7