BHAGYA KALITA,GUWAHATI vs. ACIT, CENTRAL CIRCLE-1, GUWAHATI

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that consequent to the search and seizure action the assessee had declared certain income. From the assessment order para 3, it is evident that the assessee had disclosed a sum of ₹1.70 Crore on account of undisclosed rental income received in cash during the financial year relevant for AY 2020-21 on the basis of the documents found and seized during the course of search and seizure action, which amount was disclosed in the return of income filed and taxes thereon had been paid by the assessee. Similar sum of identical amount of ₹1.70 Crore was also disclosed on account of similar undisclosed rental income for AY 2021-22, besides a sum of ₹2,93,00,000/- on account of cessation of liabilities but on which no penalty was imposed. It was stated that no documents have been I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. identified for the disclosure nor any such document is mentioned either in para 3 of the assessment order, or in the penalty order. The assessee had filed written submissions in response to the notice issued and this fact is mentioned in para 2 of the assessment order. The disclosure so made was accepted without any enquiry nor any further enquiry was made by the Ld. AO. During the course of hearing before us, the Ld. AR has relied upon the decision of the Hon'ble Supreme Court in the case of K. Krishnamurthy vs. Deputy Commissioner of Income-tax [2025] 171 taxmann.com 413 (SC)/[2025] 303 Taxman 499 (SC)/[2025] 473 ITR 557 (SC)[13-02-2025], specifically paras 31, 34, 35 extracted as under, in support of the claim that the penalty was not leviable:

It was also submitted that there are several other judgements which state that the penalty may not be imposed in certain situations, i.e., it is discretionary and not mandatory to levy penalty in every such I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. case and the Ld. AO had not considered the facts and circumstances of the case before imposing the penalty.

The Ld. DR, on the other hand, relied upon the order of the Ld. CIT(A) and countered that the decision in the case of K. Krishnamurthy (supra) was in the context of section 271AAA of the Act which has different provisions and relates to searches conducted before 1st July, 2012 while section u/s 271AAB of the Act relates to the searches conducted after 1st July, 2012. Further in the case of K. Krishnamurthy (supra), the Hon'ble Supreme Court, referring to the provisions of sub-section (2) of section 271AAA of the Act and which exclude the provisions of subsection (1) to be applicable if the conditions mentioned in sub-section (2) are specified, have held that penalty under sub-section (1) of section 271AAA of the Act was not attracted on the said amount. However, there is no such exclusionary provision mentioned in section 271AAB of the Act so as to exclude the imposition of penalty upon certain conditions being fulfilled. Hence, he emphasised that the decision relied upon being distinguishable on facts as well as in law is not applicable to the facts of the case of the assessee.

We have considered the submissions made and have also gone through the facts of the case. As is mentioned in para 3 of the assessment order, the Ld. AO had made the addition on the basis of a disclosure of ₹1.70 Crore “as discovered in the documents seized during the course of search and seizure action on the assessee, which has been disclosed in the ITR and taxes thereon have been paid by the assessee.” However, neither the details of annexure vide which these documents were found and seized nor the nature of the document or any specific mention of the amount in these documents has been mentioned in the I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. assessment order. A perusal of the order u/s 271AAB of the Act shows that in response to the show cause notice dated 07.04.2022 issued u/s 271AAB(1A)(a) of the Act, the assessee did not file any reply, but to the further notices issued on 04.07.2022 and 31.08.2022, the assessee filed a reply on 01.09.2022 which has been reproduced in the penalty order. It was stated in the reply filed that the assessee had disclosed a sum of ₹1.70 Crore as the rental income from house property in order to have peace of mind and to avoid litigation and penalties. The disclosure was made on the basis of the loose sheets which were found during the search and the same were not verifiable to be genuine and the Investigating Officer also verified from the various parties/sources whose names appear on these loose papers but not a single person had confirmed the said rent paid to the assessee. It was submitted that the assessee offered the income only to have ‘peace of mind’ and to avoid litigation and penalties. The Ld. AO considered the submission of the assessee and has mentioned that the provisions of section u/s 271AAB of the Act are self-contained and there is no discretion available with the Assessing Officer as the parameters by which the Assessing Officer or the Tax Authorities are bound in regard to the rate of penalty and the circumstances on the basis of which the penal provision can be attracted are self-explanatory. He has also mentioned that the Coordinate Benches of the Tribunal have categorically held that the expression ‘undisclosed income’ is given a definite and specific meaning and the word has not been described in an inclusive manner so as to enable the tax authorities to give wider or elastic meaning which enables them to bring within its ambit the species of income not specifically covered by the definition. Moreover, such penal provisions are required to be interpreted in a strict, specific and restricted manner and not in I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. an inclusive manner. If the surrendered income does not fall in the definition of ‘undisclosed income’ as defined u/s 271AAB of the Act, the penalty is not warranted. However, the definition of ‘undisclosed income’ is fully matched in the instant case as during the search operations, various incriminating documents were found and out of them, some documents for ₹1.70 Crore regarding undisclosed rental income were related to the assessee for AY 2020-21. According to the Ld. AO it implies that the assessee had not disclosed the true and fair picture of his income details and in case the search action had not taken place, then these undisclosed incomes would not have been declared before the Department for payment of tax. Hence, according to him it is amply clear that the assessee had hidden his income for the year under consideration by not disclosing the same which was later disclosed during the search action. Thereafter, the provisions of section u/s 271AAB(1A)(a) of the Act have been reproduced and the penalty has been imposed. The Ld. CIT(A) has reproduced the penalty order and has given his findings as under: “The Appellant contended that the AO was not justified in law as well as on facts in levying penalty u/s 271AAB of Rs. 51,00,000/-. In the penalty order, the AO observed that the definition of undisclosed income as specified in the relevant Section is applicable to the Appellant and the penal provisions cannot be interpreted in an inclusive manner. The AO rejected the Appellant's contention that additional income was offered only to have peace of mind and to avoid litigation. The AO proceeded to impose penalty of the impugned amount. During the appellate proceedings, the Appellant pleaded that no penalty can be levied since no addition was made in the assessment order. It was explained that disclosure u/s 132(4) of the Act amounting to Rs. 1.70 cr was made on account of undisclosed rental income received in cash during the year under consideration. The same was discovered in the documents seized during the course of search action at his premises. The Appellant further stated that the said undisclosed income was declared in the ITR and corresponding taxes have been duly paid. It has been averred by the I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. Appellant that the said additional income does not fall within the definition of Undisclosed income as per the Act. On perusal of the assessment order, penalty order & the submissions, it is clear that there is no merit in the Appellant's contentions. Several incriminating documents were seized during the action which revealed that rental income was received in cash and the same was not offered to tax before the search. The Appellant had not disclosed the true & fair picture of income details initially. It is amply clear the Appellant had hidden his income for the relevant year by not disclosing the income which was later disclosed during the search action. Thus, the additional income declared in the ITR falls within the ambit of undisclosed income as specified in the Act. It can be concluded that the instant case is a fit case for levy of penalty in accordance with the provisions of Section 271AAB of the Act. Hence, the penalty u/s 271AAB amounting to Rs. 51,00,000/- levied by the AO is hereby confirmed. Ground No. 1 is dismissed accordingly.”

In the grounds of appeal, the assessee has stated that the penalty is not leviable in as much as it is not the ‘specified previous year’. In this context it is relevant to refer to the definition of various terms appearing in section 271AAB of the Act, including the term ‘specified previous year’ and to ascertain as to whether the penalty was leviable on the facts of the case and whether the assessee could have not been saddled with penal consequences. The provisions of section 271AAB(1A) applicable to the facts of the case are extracted hereunder: “Penalty where search has been initiated. 271AAB. ….. (1A) The Assessing Officer or the Commissioner (Appeals) may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President but before the 1st day of September, 2024 the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, if the assessee- I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a). (2) No penalty under the provisions of section 270A or clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) or sub-section (1A). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) “specified date” means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued 22[under section 148 or under section 153A, as the case may be,] for furnishing of return of income expires, as the case may be; (b) “specified previous year” means the previous year- (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (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 I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. (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.”

A perusal of the same shows that since the previous year had ended before the date of search and the date of furnishing the return of income under sub-section (1) of section 139 of the Act for the search year had not expired before the date of the search, the penalty at the rate of 10% as per the provisions of clause (a) to sub-section (1A) of section 271AAB of the Act was leviable. The assessee has argued that it is not the ‘specified previous year’. If it is so, clause (b) of sub-section (1A) of section 271AAB of the Act is applicable if the case is not covered under the provisions of clause (a). Therefore, on this ground alone that it is not the specified previous year, the appeal is liable to be dismissed since the relevant year is the specified previous year.

The assessee further contends that the disclosure was made in order to have ‘peace of mind’ and to avoid litigation and penalties. However, it has not specified the manner of earning such income and the same amount has also been disclosed in AY 2021-22 which is also the specified previous year as per sub-clause (ii) of clause (b) of the Explanation below sub-section (3) of section 271AAB of the Act and which is relevant for the appeal in ITA No. 257/GTY/2024 for AY 2021- 22 while for the impugned assessment year sub-clause (i) of clause (b) of the Explanation is relevant.

Further, while the assessee’s argument that he had made a disclosure only in order to purchase peace and to avoid litigation is not tenable in view of the decision of the Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs. Commissioner of Income-tax - II [2013] 38 I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. taxmann.com 448 (SC)/[2013] 358 ITR 593 (SC)/[2013] 263 CTR 1 (SC)[30-10-2013], wherein it has been held that voluntary disclosure does not relieve the assessee from the mischief of penal proceeding u/s 271(1)(c) of the Act. Thus, in the case of the assessee, the penalty was liable to be levied as per the provisions of sub-section (1A) of section 271AAB of the Act even if he had made the disclosure for any reason including peace of mind. The Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. (supra) have held as under: “■ The Assessing Officer, shall not be carried away by the plea of the assessee like 'voluntary disclosure', 'buy peace', 'avoid litigation', 'amicable settlement', etc. to explain away its conduct. ■ The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. ■ The burden is then on the assessee to show otherwise, by cogent and reliable evidence. ■ When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the revenue to show that the amount in question constituted the income and not otherwise. [Para 7] ■ Assessee has only stated that he had surrendered the additional sum with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. ■ Statute does not recognize those types of defences under the Explanation 1 to section 271(1)(c). It is trite law that the voluntary disclosure does not release the assessee from the mischief of penal proceedings under section 271(1)(c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. [Para 7] ■ The surrender of income on this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the Assessing Officer in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. {emphasis supplied}

Although the decision is rendered in the context of section u/s 271(1)(c) of the Act but the principle enunciated is equally applicable to section 271AAB of the Act as well as the nature of the default is not only similar but also more severe. Since penalty u/s 271AAB of the Act is not included in section 273B of the Act, once the facts are on record that the case is covered under the provisions of section 271AAB of the Act, there is no discretion available with the Ld. AO as per the provisions of the Act to either reduce the penalty or to waive it off.

However, the penalty was leviable only on the ‘undisclosed income’ which has not been quantified by the Ld. CIT(A). We have also noticed that the Ld. AO has not mentioned as to what were the documents found and seized for computing the undisclosed income as the penalty can be levied only on the basis of the sum computed at the rate of 30% or 60% as the case may be of the ‘undisclosed income’ of the specified previous year. As per clause (c) of the Explanation to section 271AAB of the Act, the ‘undisclosed income’ is defined in an exhaustive manner. The Ld. AO has not mentioned any entry in the books of account or other documents or transactions found during the course of search on the basis of which he has concluded that it is the ‘undisclosed income’ of the assessee on which the penalty is levied. Even the Ld. CIT(A), while confirming the penalty, has not mentioned as to what was the undisclosed income and how was the same computed. In this respect, we note that Section 250(6) of the Act casts a duty on the Ld. CIT(A) to pass an order in appeal which should state the points for determination and a decision as well as the reason for arriving at such decision; however, the Ld. CIT(A) upheld the view of the AO and has not passed I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. a reasoned order for arriving at the decision, as is required u/s 250(6) of the Act. We further note that in Ajji Basha Vs. CIT (2019) 111 taxmann.com 348 (Madras) it has been held that a speaking order on merits with reasons and findings is to be passed by Commissioner (Appeals) on basis of ground raised in assessee's appeal; he cannot dispose the assessee's appeal merely by holding that the Assessing Officer's order is a self-speaking order which requires no interference. The relevant extract from the order is as under: 6. … The first respondent is the appellate authority. Needless to state that the Appellate Authority is also a fact finding authority and therefore, he has to consider the order of assessment on the grounds raised in the appeal and thereafter, pass a speaking order on merits and in accordance with law by giving his own reasons and findings as to whether the order of assessment can be sustained or not. In other words, the order passed by the Appellate Authority should explicitly exhibit his application of mind to the facts and circumstances and the objections raised in the grounds of appeal, also by expressing his reasons and findings in support of his conclusion.

In this case, the Appellate Authority, after extracting the order of the Assessing Officer in full, has not given any other reason or finding to dismiss the appeal except by stating that he is of the considered view that the Assessing Officer's order is a self speaking order and does not call for any interference. In my considered view, such single line finding of the Appellate Authority, cannot be sustained as a proper exercise of the Appellate Authority, while disposing the appeal. Therefore, it is apparent that the order impugned in this writ petition is an outcome of total non-application of mind. Consequently, the impugned order cannot be sustained. It is further contended that before passing the order, the petitioner was not heard.

It has also been held in the case of Commissioner of Income-tax (Central) Nagpur v. Premkumar Arjundas Luthra (HUF) [2016] 69 taxmann.com 407 (Bombay) after discussing the provisions of sections 250(1) and 251(1) that the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act. The relevant extract is as under: I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita.

From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.

Since it is not apparent from the penalty order or the assessment order as to what were the documents on the basis of which the penalty was levied nor the Ld. CIT(A) has identified the same while confirming the penalty, therefore, in the interest of justice and fair play to both the assessee as well as the Ld. AO, the order of the Ld. CIT(A) is hereby set aside and the appeal is restored to him with the direction to ascertain whether there was any undisclosed income as per the definition in I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. clause (c) of the Explanation below section 271AAB of the Act and consider the submissions of the assessee which may be filed and thereafter give a specific finding as to whether the penalty was leviable for the specified previous year.

Thus, after examining the facts of the case and the law, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the appeal back to the Ld. CIT(A), who shall examine and give a finding as to the ‘undisclosed income’ on the basis of the documents found and seized, quantify the same and dispose the grounds of appeal taken by the assessee on merit by passing a speaking order. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments. The Ld. CIT(A) shall consider the provisions of section 271AAB of the Act and rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided to the Ld. AO, if required and thereafter he shall pass a speaking order in accordance with law as he has merely reproduced the order of the Ld. AO and has confirmed the same which does not appear to be a speaking order as only the view of the Ld. AO has been confirmed. Accordingly, the grounds taken by the assessee in his appeal are partly allowed for statistical purposes.

As regards AY 2021-22, the relevant previous year also falls under the definition of ‘specified previous year’ as per the facts of the case. However, the grounds of appeal are slightly different and it is stated that the Ld. AO was not justified in leaving penalty 271AAB of the Act. However, since the appeal is against the order of the Ld. CIT(A), the same ought to have referred to the appeal order instead of referring to I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. the order of the Ld. AO which has been merged in the order of the Ld. CIT(A). However, the facts are identical and neither the ‘undisclosed income’ has been identified on the basis of the seized documents nor the assessee can avail the benefit of ‘buying peace’ and prima facie the penalty appears to be leviable as there was no discretion available with the Ld. AO or even with the Ld. Pr. CIT to waive the same; however for AY 2021-22 also, following our findings in AY 2020-21 which shall mutatis mutandis also apply to the facts of the case for A.Y. 2021-22, we set aside the order of the Ld. CIT(A) for AY 2021-22 as well and direct him to pass a speaking order afresh as per our decision in AY 2020-21 as per the preceding paragraphs. For statistical purposes the appeal for AY 2021-22 is also partly allowed.

In the result, both the appeals filed by the assessee are partly allowed for statistical purposes. Order pronounced on 29th September, 2025 under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963. [Manomohan Das] [Rakesh Mishra] Judicial Member Accountant Member Dated: 29.09.2025 Bidhan (Sr. P.S.) I.T.A. Nos.: 256 & 257/GTY/2024 Assessment Years: 2020-21 & 2021-22 Bhagya Kalita. Copy of the order forwarded to:

CIT(A)-Central NER, Guwahati.

CIT-

CIT(DR), Guwahati Benches, Guwahati.

Guard File. //// By order