Penalty under section 271AAC for income determined as unexplained under section 69B sustained due to lack of exclusion evidence

Penalty under section 271AAC is attracted where income is held to fall within the ambit of section 69B; the assessee failed to establish applicability of the exclusionary clause in section 271AAC(2) or produce credible evidence or reasonable cause to negate penalty, and disclosure during search does not itself preclude levy once income is judicially determined to be unexplained. The statutory penalty was therefore found justified and sustained by the tribunal, resulting in dismissal of the appeal against the levy.

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Issues: Whether the penalty of Rs. 54,600 imposed under section 271AAC of the Income-tax Act, 1961 in respect of cash found and assessed under section 69B read with section 115BBE is justified.

Analysis: The Tribunal noted that the amount of Rs. 7 lakhs cash was judicially determined to fall within the deeming provision of section 69B and taxed at the special rate under section 115BBE. The statutory scheme of section 271AAC applies where income is assessed under sections 68 to 69D and brought to tax under section 115BBE. The assessee's disclosure during search and subsequent inclusion in the return were examined against the exclusionary clause in section 271AAC(2). No material or credible evidence was produced to establish that the statutory conditions for non-levy of penalty were satisfied or that reasonable cause existed to avoid penalty. In the absence of such evidence, the requirements for invoking the exclusion under section 271AAC(2) were not met.

Conclusion: The penalty of Rs. 54,600 imposed under section 271AAC is upheld and the appeal is dismissed.

Ratio Decidendi: Where income is assessed under section 69B and taxed under section 115BBE, penalty under section 271AAC is attracted unless the assessee satisfies the exclusionary conditions of section 271AAC(2) by adducing credible evidence of reasonable cause.

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