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Facts
A search and seizure operation was conducted on the assessee's premises, revealing undisclosed income from various businesses and investments. The assessee, citing acute depression and memory loss, failed to file returns or explain the seized documents, leading to ex parte assessments under Section 144. The quantum additions were sustained by the Tribunal, and the dispute now concerns the levy of penalty under Section 271AAB.
Held
The tribunal held that once the income falls within the definition of 'undisclosed income' as per Section 271AAB, the levy of penalty is automatic. The provisions of Section 273B, which allow for reasonable cause, do not apply to Section 271AAB. Therefore, the penalty levied by the lower authorities was upheld.
Key Issues
The key legal issue was whether the CIT(A) was justified in confirming the levy of penalty under Section 271AAB of the Act, especially when the additions were based on estimates and the assessee cited health issues.
Sections Cited
Section 132, Section 144, Section 153A, Section 271AAB, Section 273B
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Income Tax Appellate Tribunal, AGRA BENCH “SMC”: AGRA
Before: SHRI M. BALAGANESH
to 509/AGR/2025 for AYs 2008-09 to 2013-14, arises out of the order of the ld. Commissioner of Income Tax (Appeals)-4, Kanpur [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 17.09.2025 against the order of assessment passed u/s 144 r.w.s. 153A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 19.08.2016 by the Assessing Officer, ACIT, Central Circle, Agra (hereinafter referred to as ‘ld. AO’). Identical issues are involved in these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.
The only identical issue to be decided in these appeals is as to whether the learned CITA was justified in confirming the levy of penalty under section 271AAB of the Act in the facts and circumstances of the instant case.
I have heard the rival submissions and perused the materials available on record. A search and seizure operation u/s 132 of the Act was conducted in the premises of the assessee on 12-11-2013. Pursuant to the search, notice u/s 153A of the Act stood issued to the assessee on 25.06.2015. No return of income was filed by the assessee in response to the notice u/s 153A of the Act. The Assessing Officer found that assessee had not filed his returns of income prior to the search. The Assessing Officer noted that the search was also conducted at 2nd floor, Heritage Tower, Nehru Nagar, Agra at the premises of Heritage JBM Builders and also at the premises of Hotel Poonam Plaza wherein the hotel under the name and style of Aryan Motels are being run by the assessee under the partnership firm. During the course of search and seizure operation, various documents related to the activities of the assessee in respect of trading of land and running of hotel business and also running of petrol pump under the name and style of J.Lal filling station of which the assessee is a proprietor, were found. During the course of search, it was noticed that assessee has earned income from petrol pump under the name and style of J.Lal filling station, rental income and also income from the Hotel Poonam Plaza (Aryan Motels) which is stated by the assessee as a partnership firm. The assessee during the course of search gave a statement confirming the fact of making investment in various properties and in construction of the properties, one at Shahjung namely Jeevan Sheela complex and the other at Dayal Bagh road, Agra. The assessee also submitted that all the investments either made in the name of family members or in his name are invested by him and he will explain the nature and source of such investment on an overall basis. Further, the assessee's family members comprising of his wife, his son and his daughter-in-law also submitted in their declaration stating on oath that the investments whatever made and found during the course of search in their names, were made by Mr. Satish Arora (assessee herein) either as capital or other investment and the same may kindly be considered in the hands of Satish Arora (assessee herein) and that they had not made any investments on their own. Based on all these declarations, the revenue sought to treat all the investments made in the whole family as being made by assessee herein.
During the course of proceedings u/s 153A, the ld AO noted that the Assessee’s Counsel together with the assessee attended the hearing, but could not explain the nature and source of papers seized during the course of search and seizure operation and it was submitted that assessee is suffering from acute depression since 2007 that resulted in loss of memory for which the assessee had filed some prescriptions of the doctors. The assessee also submitted that he does not remember any happening or any entries which are written in the seized documents. Accordingly, the Learned AO having taken cognizance of the fact of investment having made in lands , in hotel and petrol pump by the assessee and the fact of assessee actually earning income from petrol pump, from hotel business, from lands. among others and in view of the fact that no return of income has been filed by the assessee either prior to the search or in response to the notice under Section 153A of the Act, had no other option but to complete the assessments ex parte under Section 144 of the Act for the relevant years. The quantum assessment was subjected to challenge up to the level of Tribunal and the total income finally assessed after the Tribunal order are tabulated as under:-
Head of Income 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Income from 6,00,000/- 10,00,000/- 10,00,000/- 6,00,000/- 7,00,000/- 10,00,000/- 10,00,000/ “ petrol pump business Income from 20,00,000/- 25,00,000/- 25,00,000/- 25,00,000/- 25,00,000/- 25,00,000/- 35,00,000/- sale & purchase of land Investment 80,27,000/- 29,59,940/- towards the construction Total 26,00,000/- 35,00,000/ 35,00,000/- 31,00,000/- 32,00,000/- 1,15,27,000/- 74,59,940 - /-
Discussion in the Page Page 7 & 8 Page 7 & 8 Page 7 & 8 Page 7 & 8 Page 7 & 8 Page 8 & 9 assessment 8 & 9 order at page
The dispute before me is the levy of penalty under section 271AAB of the Act in respect of the aforesaid final additions sustained by the Tribunal. From the aforesaid chart, it is evident that income determined by the learned AO for assessment years 2008-09 to 2013-14 (being the years under consideration before me) in respect of income from petrol pump business and income from sale and purchase of lands are purely on estimated basis wherein only an ad-hoc addition has been made which stood sustained by the Tribunal. The seized documents only indicated that assessee was engaged in these businesses and it did not indicate in any manner what was the amount of investment made and what was the amount of income earned thereon in each of the years. However, in order to put an end to the litigation, the assessee had accepted for the final additions that were made in respect of income from petrol pump business and income from sale and purchase of lands, eventhough the same were determined by the Learned AO on an estimated basis. No doubt the assessee had indeed made investment in hotel, lands and in petrol pump and had earned receipts thereon. But the assessee had taken a plea that due to his illness in the form of acute depression since 2007, which had eventually resulted in loss of memory; that he is not able to remember any of the things which had happened in his own businesses, which fact is not found to be false by the revenue; that the assessee had taken a plea that he had only incurred losses in his businesses and because of his inability in producing the proper books of accounts before the learned AO to prove the incurrence of losses, he had accepted to the estimated additions made by the Learned AO for the various assessment years in order to put an end to the litigation given his health condition, in the quantum proceedings. Similarly, with regard to additions on account of investment made towards the construction, the same is duly supported by the valuation report of the Departmental Valuation Officer and the additions were made on account of cost of construction of the properties as estimated by the Learned Departmental Valuation Officer. The said additions were accepted by the asesssee only in order to put an end to the litigation as he is not in proper frame of mind to pursue the litigation due to his illness and other reasons detailed in the initial part of the order. Hence the entire additions were made for all the years under consideration only based on estimate basis. It is trite law that no penalty for any concealment or for any undisclosed income could be made for an estimated addition. But on plain reading of the provisions of section 271AAB of the Act, I find that once the element of undisclosed income stood accepted by the assessee, there is no leeway provided for the levy of penalty. The expression ‘undisclosed income’ is defined in the Explanation to section 271AAB of the Act and the transactions of the assessee would squarely fall under the ambit of ‘transactions found in the course of search under section 132’ which has not been disclosed to the revenue before the date of search. Further I find that the provisions of section 271AAB of the Act does not grant any immunity from penalty even if the assessee was able to show some reasonable cause in terms of section 273B of the Act as the provisions of section 273B specifically omits section 271AAB of the Act. Hence once the transaction fall within the definition of ‘undisclosed income’ as defined in the Explanation to section 271AAB of the Act, the levy of penalty under section 271AAB of the Act becomes practically automatic. Hence I uphold the levy of penalty for all the assessment years under consideration before me. Accordingly, the grounds raised by the assessee are dismissed.
In the result, all the appeals of the assessee are hereby dismissed.
Order pronounced in the open court on 03/02/2026.