Section 271AAB penalty fails where disclosure is voluntary and unconnected to search material or recorded satisfaction.

Penalty under section 271AAB was found unsustainable where the amount disclosed in the return was a voluntary disclosure, not linked to any incriminating material found during search or to the statement recorded under section 132(4). The analysis notes that the disclosure was not shown to arise from any income, asset, document or transaction unearthed in search, and neither the assessment order nor the penalty order recorded satisfaction about undisclosed income. On that reasoning, the statutory ingredients for invoking section 271AAB were not treated as satisfied and the penalty was directed to be deleted.

---

---

Issues: Whether penalty under section 271AAB of the Income-tax Act, 1961 could be sustained where the amount declared in the return was a voluntary disclosure not linked to any incriminating material found in search or to the statement recorded under section 132(4), and where no satisfaction regarding undisclosed income was recorded in the assessment or penalty order.

Analysis: The assessee was searched under section 132(1), but the amount ultimately offered in the return for assessment year 2015-16 was found to be a voluntary disclosure and was not shown to arise from any item of income, asset, document, or transaction unearthed during search. The disclosure made in the return was not established to be part of the statement recorded under section 132(4), and the assessment and penalty orders did not contain a satisfaction note on the existence of undisclosed income. In these circumstances, the ingredients for invoking section 271AAB were not treated as satisfied.

Conclusion: Penalty under section 271AAB was held to be unsustainable and was directed to be deleted, in favour of the assessee.

---