Penalty for search-based undisclosed income applies even when income is estimated from seized material and admissions.

Penalty under Section 158BFA(2) may be imposed where undisclosed income is determined under Section 158BC(c) on the basis of search material, even if the figure is reached by estimation or inference rather than purely arithmetical computation. The provision is not limited to cases of exact quantification, and seized material together with the assessee's statement under Section 132(4) can support the characterisation of part of the disclosed turnover as accommodation-entry business. A later reduction in the commission rate did not displace the core finding that the income had been determined from search evidence and admission, so the penalty remained exigible.

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Issues: Whether penalty under Section 158BFA(2) of the Income-tax Act, 1961 could be levied where the undisclosed income was determined on estimation from material found in search proceedings.

Analysis: Section 158BFA(2) empowers the Assessing Officer or the Commissioner (Appeals) to levy penalty with reference to the undisclosed income determined under Section 158BC(c). The provision does not exclude cases where the determination is based on estimation or inference, so long as the assessment rests on material discovered in the course of search. The assessee's original disclosure of the turnover did not prevent the revenue authorities from treating part of it as accommodation-entry business after the statement recorded under Section 132(4) altered the character of the disclosure. The Tribunal's reduction of the commission rate did not undermine the basic finding that the income had been determined on the basis of seized material and the assessee's own admission.

Conclusion: Penalty under Section 158BFA(2) was exigible and the question was answered against the assessee.

Ratio Decidendi: Penalty under Section 158BFA(2) can be imposed on undisclosed income determined under Section 158BC(c), including income estimated from search material and admissions, and the provision is not confined to income computed on a purely arithmetical basis.

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