Penalty under section 271AAB must match only the truly unexplained portion of search additions, not the entire assessed amount.

Penalty under section 271AAB is confined to the portion of income actually established as undisclosed on the evidence, rather than the full amount of a search-related addition. Where most of the cash was already accepted as arising from regular sales, only the balance unexplained amount could support penalty. The excess jewellery stock addition was also not fully sustainable because the search inventory and departmental records did not properly establish that alleged undisclosed stock. Penalty proceedings are independent of assessment proceedings, so the taxpayer may raise fresh contentions even if the assessment order was not challenged.

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Issues: Whether penalty under section 271AAB of the Income-tax Act, 1961 was leviable on the full amount of alleged undisclosed cash and excess jewellery stock found during search, or whether it was sustainable only to the limited extent of the amount actually treated as undisclosed.

Analysis: The search resulted in an addition relating to cash and another relating to excess jewellery stock. As regards cash, the assessment record showed that the greater part of the amount had been accepted as arising from regular sales and only the balance remained unexplained. As regards the jewellery stock, the inventory prepared during search included gold bars, whereas the departmental annexure relied upon by the assessee did not reflect that stock, giving force to the contention that the excess stock position had not been properly appreciated. The fact that the assessee did not challenge the assessment order did not preclude it from contesting penalty, since penalty proceedings are independent of assessment proceedings and fresh contentions can be raised in penalty proceedings.

Conclusion: Penalty under section 271AAB could not be sustained on the entire cash and stock additions; it was sustainable only on the limited unexplained cash amount of Rs. 58,323, and not on the excess stock addition.

Final Conclusion: The penalty was confined to the balance unexplained cash and deleted in relation to the jewellery stock addition, resulting in partial relief to the assessee.

Ratio Decidendi: Penalty under section 271AAB must be confined to the portion of income actually found to be undisclosed on the evidence, and it cannot be sustained merely because an assessment addition was accepted, where penalty proceedings independently show that part of the addition is explained or not properly established.

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