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Facts
The assessment for AY 2018-19 resulted in an addition of Rs. 5,50,06,383/- as undisclosed income declared under Section 132(4) of the Income Tax Act, 1961. This income was not reflected in the assessee's income tax return, leading the Assessing Officer to initiate penalty proceedings under Section 271AAB, imposing a penalty of Rs. 3,30,03,830/- (60% of the undisclosed income). The CIT(A) confirmed the penalty, and the assessee appealed to the Tribunal, arguing that non-reflection was due to technical reasons and the penalty notice was vague.
Held
The Tribunal held that since the assessee had not paid tax on the disclosed undisclosed income, they were liable for a 60% penalty under Section 271AAB(1)(c), which is automatic and leaves no discretion to the Assessing Officer. The argument regarding the vague penalty notice was rejected, as the penalty provision is self-executing. The Tribunal upheld the penalty imposed by the Assessing Officer and confirmed by the CIT(A).
Key Issues
1. Whether penalty under Section 271AAB is leviable when undisclosed income declared under Section 132(4) is not included in the income tax return. 2. Whether a penalty notice under Section 271AAB is invalid if it does not specify the particular sub-clause under which the penalty is initiated.
Sections Cited
Section 271AAB, Section 143(3), Section 132(4), Section 274, Section 271
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN & SHRI RATNESH NANDAN SAHAY
Assessee represented by Shri Akshay Ringasia, A.R. Department represented by Smt. Rinku Singh, CIT-DR Date of hearing 09/06/2025 Date of pronouncement 09/06/2025 O R D E R PER: BENCH 1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals), Patna-3, Patna (in short, the ld. CIT(A)) dated 20/01/2024 for the A.Y. 2018-19. In this appeal, the assessee has raised following grounds of appeal:
1. That the Ld. Lower Authorities erred in levying and confirming penalty of Rs. 1,93,04,905/- under Section 271AAB.
2. That the Ld. AO erred in passing order which was in violation of limitation of levying penalty.
3. That the appellant craves leave to add, delete or modify any grounds of appeal in the course of hearing."
2. Facts of the case, in brief, are that the assessment in this case was completed under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) on 28/11/2019 by making addition of Rs. 5,50,06,383/- as undisclosed income as declared under Section 132(4) of the Act. However, this income was not declared in the income tax return filed by the assessee. The Assessing Officer, ITA 79/Ran/2024 Sidhi Vinayak Metcom Limited Vs ACIT therefore, initiated penalty proceedings under Explanation (c) to Section 271AAB of the Act and notice under Section 274 of the Act was duly served on the assessee on 31/12/2019 to show cause as to why the penalty under Section 271AAB of the Act should not be imposed in this case. During the penalty proceedings, the appellant submitted that though, the appellant has already paid the taxes on the disclosure of Rs.5,50,06,383/- made under Section 132(4) of the Act but due to some technical reason, the same was not reflected in the return of income filed by the appellant and since there is no variation in respect of returned income and assessed income, penalty was not imposable in this case in view of Supreme Court decision in PCIT vs Rajkumar Gulab Badgujar (2019) 111 Taxmann 257 (SC) and also by ITAT Ranchi in the case of Smt. Krishna Devi& others vs ACIT, Central Circle-2 Ranchi. The AO, however, the Assessing Officer, imposed a penalty of Rs. 3,30,03,830/- @ 60% of the total undisclosed income of Rs. 5,50,06,383/- by distinguishing both the above cases cited by the assessee.
3. Aggrieved by the order of Assessing Officer, the appellant filed appeal before the ld. CIT(A), who vide the impugned order, confirmed the penalty imposed by the Assessing Officer on the ground that the disclosure was made by the appellant voluntarily but if it was not incorporated in the return of income filed by appellant during the year under consideration, the Assessing Officer was bound to impose penalty @ 60% as per provisions of Section 271AAB of the Act.
ITA 79/Ran/2024 Sidhi Vinayak Metcom Limited Vs ACIT 4. Aggrieved by the order of ld. CIT(A), the assessee filed the present appeal before this Tribunal. During the appellate proceedings before us, the ld. AR of the appellant has submitted as under: "1.1 That the facts leading to imposition of such penalty order is that an assessment under section 143(3) was concluded in case of the assessee and returned income was accepted which included certain income on account of alleged undisclosed income. 1.2 That in consequence of above assessment order under section 143(3), penalty proceeding under section 27 1AAB was initiated. However, no sub-section on clause under the subs-section was ever specified in the assessment order. The extract thereof is as under: [Penalty u/s 271AAB Is Initiated for concealment of income to the tune of Rs. 5,50,06,383/-) Rather the assessment order suggested that the penalty was initiated for "concealment" of Income when the section itself does not provide for an penalty for "concealment" and limited to issue of "undisclosed income". The said order is enclosed at page 6 of this submission. 1.3 That even the notice for initiation if 271AAB never suggested the sub-section or allegation against the assessee in first place. The relevant screenshot is as under:
Again, there was no sub-section or clause specified and neither there was any show-cause for any "undisclosed income" which is sine-qua non. On the contrary the assessment order limited itself to the issue of "concealed income" which has no relevance to section 271AAB. The said notice is enclosed at page 10 of this submission.
ITA 79/Ran/2024 Sidhi Vinayak Metcom Limited Vs ACIT 1.4 That it is further submitted that the penalty notice issued u/s 271AAB of the Act is not in any manner depicting the charge against the assessee as to whether under which clause (a), (b) or (c) of Section 271AAB (1) or Clause (a) or (b) of 271 AAB (1 A) of the Act, penalty is leviable on the assessee. Thus, it is submitted that the notice initiating the penalty u/s 271AAB of the Act is a vague notice and therefore, illegal consequently, the order of penalty and the order of the Ld. CIT(A) thereon deserves to be set aside." The ld. AR of the appellant further placed reliance on various judicial pronouncements in support of the above submissions as under: Jaina Marketing & Associates Vs DCIT (2024) 162 taxmann.com 439 (Delhi Trib) (20-03/2024) Mahaveer Prasad Agarwal Vs DCIT (IT Appeal) No. 1218 (JP) of 2019 dated 02/06/2022 (Jaipur ITAT) Ashok Bhatias Vs DCIT (IT Appeal No. 869 (Ind.) of 2018 dated 05/02/2020 (Indore ITAT) Sushil Kumar Paul Vs ACIT (IT Appeal No. 2274 (Kol) of 2019 dated 15/12/2022 (ITAT Kolkata) Hyderabad Tribunal in ACIT Vs Pallem Reddy Sreelakshmi dated 04/01/2022. Indore Tribunal in ACIT Vs. Amit Tiwari dated 28/06/2022. The ld. AR of the appellant finally prayed that the impugned penalty order deserves to be quashed.
On the other hand, the ld. CIT-DR for the revenue supported the imposition of penalty.
We have considered the rival submissions. It is found that the appellant, both at the time of penalty proceedings as well as in the appellate proceeding before Ld. CIT (A) had admitted this fact that though, the appellant has made this disclosure u/s 132 (4) of the Act, however, due to some technical reason, the same was not reflected in the return of income filed by the appellant. However, 4 ITA 79/Ran/2024 Sidhi Vinayak Metcom Limited Vs ACIT in the appeal before us, the appellant has taken altogether a new stand that the penalty notice issued u/s 271AAB of the Act is not in any manner depicting the charge against the assessee as to whether under which clause (a), (b) or (c) of Section 271AAB (1) or Clause (a) or (b) of 271 AAB (1A) of the Act, penalty is leviable on the assessee and thus, the notice, initiating the penalty u/s 271AAB of the Act, is a vague notice and illegal and consequently, the penalty order deserves to be set aside.
We have gone through the provisions of the Act and it is found that the sub clause (1) of section 271AAB provides (a) in case any disclosure under Section 132, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him @ 10% (b) 20% of such undisclosed income and (c) @ 60% if the case of assessee is not covered under sub-clause (a) & (b) of Section 271AAB(1). In the instant case, the appellant has not paid any tax on the undisclosed income of ₹ 5,50,06,383/-, therefore, he is liable to pay tax @ 60% of the said undisclosed income. As per provisions of the Act, the Assessing Officer has no discretion but to impose tax at the rate prescribed under this section. Since the appellant has not complied with the provisions of this Section, the ld. CIT(A) has rightly confirmed the penalty imposed by the Assessing Officer. Regarding the appellant’s objection before us that the AO in the notice issued under Section 274 read with section 271 of the Act dated 28/11/2019 has failed to specify whether the penalty was imposed under clause (a), (b) or (c) and thus, the penalty deserves to be quashed, will not help the appellant as the penalty provided u/s 271AAB of the Act is automatic and the Assessing Officer has no discretion on that. The case laws cited by the 5 ITA 79/Ran/2024 Sidhi Vinayak Metcom Limited Vs ACIT ld. AR, as mentioned above, are clearly distinguishable. Thus, the penalty imposed by the Assessing Officer and duly confirmed by the ld. CIT(A) is upheld. In the result, grounds of appeal
raised by the appellant are dismissed.
8. In the result, this appeal of the assessee is dismissed. Order announced in open court on 09th June, 2025.