Section 271AAC of the Income Tax Act
Income-tax Act, 2025: s.443
Section 271AAC of the Income-tax Act, 1961 corresponds to section 443 (Penalty in respect of certain income) of the Income-tax Act, 2025.
Read section 443 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 271AAC is ACIT v. Prakash I. Shah (115 ITD 167), cited in 51 of the 982 judgments on BharatTax that turn on this section.
Leading authorities on Section 271AAC
The department cannot improve upon the Assessing Officer's case by changing the basis of additions without issuing a show cause notice to the assessee.
Additions to income cannot be made based solely on statements or confessions recorded at the time of a search, without corroborating evidence. Such confessions lack evidentiary value if not supported by other proof.
The Commissioner (CIT) cannot direct the Assessing Officer (AO) to initiate penalty proceedings under Section 271(1)(c) using revisional powers under Section 263 if the AO did not initiate them in the original assessment order. The CIT's revisional power under Section 263 cannot be used to create a non-existent proceeding.
Additions to income cannot be made solely on the basis of uncorroborated notes found on loose sheets or papers, especially if they are undated and lack any identifying names.
Cash deposits made post-demonetization out of cash sales, when supported by stock availability and previous year's sales patterns, cannot be treated as undisclosed income under Section 68.
An addition under section 69A is justified when cash deposits in a bank account significantly exceed reported sales and the assessee fails to provide a satisfactory explanation for the source of these deposits.
A statement recorded under section 132(4) does not by itself constitute incriminating material, and requires corroboration.
A taxpayer's mere statement, without corroborating material or evidence, cannot be the sole basis for computing income or making additions. The statement must relate to some other evidence for computation.
Delay in filing an appeal can be condoned, even if the delay is significant (e.g., 231 days), when caused by wrong advice from the assessee's counsel, demonstrating a pragmatic approach to condonation under the Limitation Act.
Where partners introduce capital into a firm, any addition for unexplained investment can only be made in the individual hands of the partners, not the firm.
