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Facts
A search operation was conducted on the assessee, who subsequently disclosed Rs.35 lakhs, including Rs.7 lakhs in cash, as additional income. The Assessing Officer (AO) taxed the Rs.7 lakhs cash component under Section 69B r.w.s. 115BBE, which was confirmed by the Tribunal in an earlier order. Following this, the AO initiated and levied a penalty of Rs.54,600/- under Section 271AAC, which the CIT(A) upheld.
Held
The Tribunal held that once an addition is sustained under Section 69B r.w.s. 115BBE, the penalty under Section 271AAC becomes mandatory and is consequential. The assessee failed to demonstrate the applicability of any exclusionary clause under Section 271AAC(2) or provide a reasonable cause for non-levy, despite having disclosed the income during the search.
Key Issues
Whether penalty under Section 271AAC of the Income Tax Act is leviable when income, though disclosed during search, is assessed under Section 69B read with Section 115BBE and that assessment is upheld by the Tribunal.
Sections Cited
132, 139(1), 143(2), 142(1), 69B, 115BBE, 271AAC, 132(4), 68, 69D, 271AAC(2)
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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Ravish SoodShri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2019-20) Shri Srinivas Chowdary Vs. Dy.CIT Vallabaneni, Secunderabad Central Circle 1(4) PAN:AEIPV3757R Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri Phaneendra Nag, CA राज� व �ारा/Revenue by:: Shri Ranjan Agrawala, Sr.DR सुनवाई की तारीख/Date of hearing: 17/11/2025 घोषणा की तारीख/Pronouncement: 26/11/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.:
This appeal is filed by Shri Srinivas Chowdary Vallabaneni (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-12, Hyderabad (“Ld. CIT(A)”) dated 15.07.2025 for the A.Y. 2019-20.
IT No 1462 of 2025 Srinivas Chowdary Vallabaneni
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee is an individual deriving income from remuneration, income from house property and income from other sources. A 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. Subsequently, the assessee filed return of income for Assessment Year 2019–20 under section 139(1) of the Act on 31.08.2019, admitting a total income of Rs.98,03,260/-, which included Rs.35 lakhs offered by the Page 2 of 8
IT No 1462 of 2025 Srinivas Chowdary Vallabaneni assessee as additional income during the course of the search proceedings. The case of the assessee was selected for scrutiny and accordingly 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 taxed the sum of Rs.35 lakhs disclosed by the assessee during the search, including Rs.7 lakhs in cash seized during the search, by invoking section 69B r.w.s. 115BBE of the Act. The appeal of the assessee for the treatment of addition of Rs.35 lakhs as income under section 69B r.w.s. 115BBE of the Act had reached this Tribunal. Vide order dated 30.08.2023 in this Tribunal held that the provisions of section 69B r.w.s. 115BBE of the Act shall apply only to the cash component of Rs.7 lakhs, and the balance Rs.28 lakhs is to be taxed under the normal provisions. Pursuant to this order of the Tribunal, the Ld. AO passed a consequential order on 17.10.2023, taxing Rs.7 lakhs under section 69B r.w.s. 115BBE of the Act. On the basis of taxation of Rs.7 lakhs under section 69B r.w.s. 115BBE of the Act, the Ld. AO initiated penalty proceedings under section 271AAC of the Act and passed penalty order dated 27.03.2024, levying penalty of Rs.54,600/- on the assessee.
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 and dismissed the appeal of the assessee.
IT No 1462 of 2025 Srinivas Chowdary Vallabaneni
Aggrieved with the order of the Ld. CIT (A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the solitary issue out of the grounds of appeal
of the assessee is the penalty of Rs.54,600/- levied under section 271AAC of the Act by the Ld. AO. In this regard the Ld. AR submitted that the assessee had already disclosed the sum of Rs.35 lakhs (including the Rs.7 lakhs cash component) during the search proceedings and further included the same in the return of income filed under section 139(1) of the Act. It was contended that there was no concealment and that the assessee had cooperated fully with the search authorities. The Ld. AR further submitted that since the assessee disclosed the income in the statement recorded under section 132(4) of the Act and subsequently offered it to tax in the return of income, the levy of penalty under section 271AAC of the Act was not justified. It was contended that the intention of the assessee was bona fide. Accordingly, the Ld. AR prayed for deletion of the penalty.
6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the lower authorities. It was submitted that this Tribunal, in its order dated 30.08.2023, has conclusively upheld the applicability of section 69B r.w.s. 115BBE of the Act to the cash component of Rs.7 lakhs. The Ld. DR submitted that once the addition has been sustained under section 69B of the Act, penalty under section 271AAC of the Act becomes mandatory, as the statutory scheme does not provide any Page 4 of 8
IT No 1462 of 2025 Srinivas Chowdary Vallabaneni exemption merely because the assessee disclosed the income during search or included it in the return. The Ld. DR argued that the penalty is consequential in nature and is attracted once the income is determined under the deeming provisions of section 69B of the Act. Accordingly, the Ld. DR prayed for confirmation of the penalty.
We have carefully considered the submissions advanced by the Ld. AR as well as the Ld. DR and have perused the material available on record. It is an admitted position that the addition of Rs.7 lakhs made under section 69B read with section 115BBE of the Act stood confirmed by this Tribunal in by order dated 30.08.2023. In pursuance of the said order, the Ld. AO has passed a consequential order dated 17.10.2023 and has correctly brought the impugned amount to tax at the special rate prescribed under section 115BBE of the Act. There is, therefore, no dispute regarding the taxability of the amount of Rs.7 lakhs under the deeming provisions of section 69B of the Act.
The Ld. AR has submitted before us that the assessee had already disclosed the entire amount during the course of search proceedings and had subsequently included the same in the return of income filed, and therefore no penalty ought to have been imposed. According to the assessee, the disclosure was voluntary and without any concealment, and consequently the penalty provisions should not be invoked. We have carefully
IT No 1462 of 2025 Srinivas Chowdary Vallabaneni examined this contention. While we appreciate that the assessee may have disclosed the income during the course of search, the fact remains that this Tribunal, after detailed consideration in the quantum proceedings, has upheld the addition under section 69B of the Act, thereby affirming that the impugned sum falling squarely within the deeming provisions of section 69B of the Act. Once the nature of income is so determined and is brought to tax in accordance with section 115BBE of the Act, the legal consequence flowing from such determination must be understood in the context of section 271AAC of the Act.
The Ld. DR has correctly contended that section 271AAC of the Act provides for levy of penalty where income is assessed under sections 68 to 69D of the Act and brought to tax under the special rate in section 115BBE of the Act. The penalty provision under section 271AAC of the Act is statutory in character and is specifically attracted when the income falls within the ambit of section 69B of the Act, as is the case here. The assessee has not demonstrated that the case falls within the exclusionary clause provided in section 271AAC(2) of the Act, nor has any credible explanation or evidence been produced to establish that penalty should not be levied. The assessee has also failed to make out any reasonable cause or bring any material to show that the penalty is not leviable in law. The mere fact that the income was disclosed during search does not exonerate the assessee from the rigor of penalty under section 271AAC of the Act once such income is judicially determined to be fall under section Page 6 of 8
IT No 1462 of 2025 Srinivas Chowdary Vallabaneni 69B of the Act. The assessee has not furnished any evidence or argument to demonstrate that the provisions of section 271AAC(2) of the Act are not applicable or that the statutory conditions for non-levy of penalty have been satisfied.
In these circumstances, and in the absence of any contrary material produced by the assessee, we are of the considered view that the penalty levied by the Ld. AO of Rs.54,600/- is valid, justified and in accordance with law. We find no infirmity in the order of the Ld. CIT(A) in confirming the said penalty. Accordingly, the penalty imposed under section 271AAC of the Act is upheld.