2026 (1) TMI 1030 - AT - Income Tax

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 ... Penalty u/s 271AAC - addition of cash seized during the search, by invoking section 69B r.w.s. 115BBE - determining nature of income HELD THAT:- The penalty provision u/s 271AAC of the Act is statutory in character and is specifically attracted when the income falls within the ambit of section 69B of the Act, as is the case here. The assessee has not demonstrated that the case falls within the exclusionary clause provided in section 271AAC(2) of the Act, nor has any credible explanation or evidence been produced to establish that penalty should not be levied. The assessee has also failed to make out any reasonable cause or bring any material to show that the penalty is not leviable in law. Mere fact that the income was disclosed during search does not exonerate the assessee from the rigor of penalty u/s 271AAC once such income is judicially determined to be fall under section 69B - assessee has not furnished any evidence or argument to demonstrate that the provisions of section 271AAC(2) of the Act are not applicable or that the statutory conditions for non-levy of penalty have been satisfied. We are of the considered view that the penalty levied by the Ld. AO is valid, justified and in accordance with law. Appeal of the assessee is dismissed. 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.