TaxTMI 
TaxTMI 
2025 (11) TMI 464
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....71(1)(c) 1,11,89,533 2 1651/Chny/2025 2017-18 12.03.2025 28.09.2022 270A 62,74,154 3 1652/Chny/2025 2018-19 12.03.2025 28.09.2022 270A 92,46,838 4 1653/Chny/2025 2019-20 12.03.2025 27.09.2022 270A 1,09,97,688 5 1654/Chny/2025 2020-21 12.03.2025 28.09.2022 270A 1,46,69,968 6 1655/Chny/2025 2021-22 13.03.2025 22.09.2022 271AAB 2,39,98,544 2. There is a delay of 5 days in filing the above appeals. The AO has filed an affidavit in each of the appeals, stating therein the reasons for belated filing of these appeals. On perusal of the reasons stated in the affidavit, we are of the view that there is `sufficient cause' and no latches can be attributed to the Department. Hence, we condone the delay of 5 days in filing these appeals and proceed to dispose off the same on merits. 3. Common issues are raised in these appeals, hence they were heard together and are being disposed off by this consolidated order. We shall first adjudicate the appeal preferred by the Revenue in ITA No.1650/Chny/2025 pertaining to the A.Y.2015-16, which arises out of the order passed by the CIT(A),....
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....hat the temple had been constructed at a cost of Rs. 56,00,000/- and that Shri Kalidas, the sculptor, had confirmed the receipt of Rs. 47,00,000/ -. The AO issued a show cause notice requiring the assessee to explain why the said expenditure of Rs. 56,00,000/- should not be treated as undisclosed income for the A.Y. 2015-16. 8. The assessee objected to the proposed addition. The AO, however, rejected the objections on the grounds that the temple is situated behind the Arunai College campus and there is no evidence of contributions or crowd-funding from the public for the temple construction. Further, AO observed that the incriminating documents evidencing the transactions were seized from the residence of the assessee. The AO accordingly concluded that the entire expenditure of Rs. 56,00,000/- towards the temple construction was borne by the assessee out of undisclosed income. Consequently, the AO added the said amount to the income returned by the assessee and completed the assessment u/s. 143(3) r.w.s 153A of the Act on 24.03.2022, assessing the total income at Rs. 4,24,15,120/ -. 9. In the assessment order, the AO recorded a finding that penalty proceedings u/s. 271(1)(c) ....
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....g the course of search, and that such material must form the very foundation of the assessment framed u/s. 153A of the Act. It was stated that in the absence of any such incriminating material discovered during the course of search at the premises of the assessee, the deeming provisions of Explanation 5A were not attracted. In light of aforesaid submission, the assessee requested the AO to drop the penalty proceedings initiated u/s. 271(1)(c) of the Act. 15. The AO upon consideration of the assessee's submissions, refrained from levying penalty in respect of the addition of Rs. 56,00,000/- made in the assessment proceedings, as the said addition was contested by the assessee before the first appellate authority. However, with regard to the additional income of Rs. 3,25,88,900/- declared by the assessee in the return of income filed u/s. 153A of the Act, the AO rejected the explanation furnished by the assessee and held that penalty u/s. 271(1)(c) of the Act was exigible thereon, as the said income was not in dispute. 16. The AO observed that the assessee had earned interest income and cover amount in respect of his investment in M/s. Life Line Auto Finance, which came to ....
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....ted that the provisions of Explanation 5A to section 271(1)(c) of the Act are attracted only where income is admitted on the basis of incriminating material unearthed during the course of a search under the Act. The assessee submitted that in the present case, the additional income of Rs. 3,25,88,900/- was offered voluntarily and not on account of any incriminating material discovered during the course of a search, and therefore, the deeming fiction of concealment under Explanation 5A is not applicable. It was further submitted that once the returned income has been accepted by the AO, there can be no concealment with respect to such income. Accordingly, the assessee contended that the penalty imposed u/s. 271(1)(c) of the Act is not sustainable in law. 19. The CIT(A), upon due consideration of the submissions advanced on behalf of the assessee, deleted the penalty levied by the AO holding that neither Explanation 5A(i) nor 5A(ii) to section 271(1)(c) of the Act is applicable to the facts of the assessee's case. The CIT(A) observed that initiation of penalty proceedings under Explanation 5A was outside the permissible scope, since the assessee was not found to be in possessi....
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.... On the other hand, the Penal Provisions are contemplated as a deterrent. Thus, while imposing the penalty the A.O. being a quasi-judicial authority must be confident enough to make a recording in the assessment order as to how the appellant has concealed income and the relevant provisions of the Act that is violated by the assessee and the necessity that warrant the levy of Penalty. Making a simple observation, that "penalty proceedings u/s 271 (1) (c) will be initiated separately for concealment of particulars of income." definitely cannot be the basis for arriving a conclusion to levy the penalty. Before levying the penalty the A.O. must establish in unequivocal term about the existence of concealment and make a speaking order. . . . 6.2.9 Further during the course of appellate proceedings, the AR has clearly demonstrated that neither Explanation 5A(i) nor (ii) applies to the case. This omission undermines the validity of the penalty proceedings as there is no clarity on the basis for their initiation. If the penalty was initiated under Explanation 5A, the AO failed to appreciate that the appellant was not found to own any undisclosed money, b....
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....ed observes the various aspects of the penalty notice issuance, its implications and on the order passed in this case viz .. ● The returned income filed u/s 153A was accepted without any deviation. ● The additional income declared was not out of any incriminating materials found during the search in the case of the appellant. ● The AO passed the assessment order for AY 2016-17 on 24.03.2022. However, the penalty notice u/s 271(1)(c) of the Act was issued three days later, i.e. on 27.03.2022. This is against the legal position of law as held by the Jurisdictional Hon'ble ITAT, 'A' Bench, Chennai on 30.08.2024 in the case of Srinivasan Chandrasekara Chandilya Vs Asst. Commissioner of Income Tax, in ITA Nos. 1478 to 1487/Chny/2024. ● The provisions of section 271(1)(c) of the Act requires the AO to form an opinion regarding the concealment of income or furnishing of inaccurate particulars of income during the course of the assessment proceedings. The notice u/s 274 r.w.s 271(1)(c) of the Act is typically issued if the AO is satisfied during the course of assessment that the taxpayer has concealed income. ....
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....sion of the Hon'ble Supreme Court in the case of MAK Data Pvt Ltd V CIT [2013] 38 taxmann.com 448 (SC) wherein the Hon'ble Supreme Court held that where surrender of income not being voluntary in nature, authorities below were justified in levying penalty under section 271(1)(c). 5. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT (Appeals) may be set aside and that of the Assessing Officer be restored." 24. The Ld. DR, in support of the grounds of appeal, contended that the assessee had disclosed an additional income of Rs. 3,25,88,900/- only pursuant to the search proceedings, and that such income would have otherwise escaped assessment but for the said search. It was further submitted that the additional income, though voluntarily offered, is liable to be regarded as deemed concealment of income for the purposes of imposition of penalty u/s. 271(1)(c) of the Act. The Ld. DR, therefore, prayed that the order of the CIT(A) be set aside and the penalty levied by the AO u/s. 271(1)(c) of the Act be upheld. 25. Per contra, the Ld.AR supported the order ....
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....eturn. In the present case, since the assessee voluntarily disclosed an additional income of Rs. 3,25,88,900/- in the return filed u/s. 153A of the Act, which was duly accepted by the AO, such disclosure cannot be construed as concealment attracting penalty u/s. 271(1)(c) of the Act. Accordingly, the Ld.AR prayed for affirming the order of the CIT(A) on this count also. 28. The Ld. AR also placed reliance upon various judicial precedents considered by the CIT(A) to argue that post-search penalty u/s. 271(1)(c) of the Act is governed by Explanation 5A thereto. However, such explanation is attracted only when the additional income disclosed is directly linked to incriminating material unearthed during the course of search. In the present case, the additional income of Rs. 3,25,88,900/- offered by the assessee comprised of (i) Rs. 29,37,500/- offered pursuant to a statement recorded during survey in the case of M/s. Life Line Auto Finance; and (ii) the balance sum of Rs. 2,96,51,400/- voluntarily offered by the assessee, unconnected with any incriminating material. Thus, it was submitted that the disclosure was not attributable to any incriminating material found during search, and....
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.... by the AO u/s. 271(1)(c) of the Act. The assessee pursuant to a search u/s. 132 of the Act offered an additional sum of Rs. 3,25,88,900/- in the return of income furnished u/s. 153A of the Act. The said sum has been duly accepted by the AO in completing the assessment. Admittedly, the aforesaid additional income offered by the assessee was not attributable to, nor did it emanate from, any incriminating material unearthed during the course of search operations carried out at the assessee's premises. The AO, however, has recorded that the disclosure of such additional income in the return filed u/s. 153A of the Act was occasioned by the factum of the search itself, and therefore, in his opinion, the disclosure could not be regarded as voluntary. On this basis, the AO inferred that the assessee had concealed income within the meaning of Section 271(1)(c) of the Act. 33. It is a settled position, supported by numerous judicial pronouncements, that the mere fact of an assessee offering a higher income in a return filed u/s. 153A of the Act when compared to the return originally filed u/s. 139 of the Act does not, in itself, constitute concealment of income so as to justify the i....
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....ent to the conduct of a search, and such revised return has been duly accepted by the AO, the mere fact that the revised return reflects a higher income than what was originally declared does not, by itself, warrant the automatic levy of penalty u/s. 271(1)(c) of the Act. The relevant extract of the judgment is reproduced hereunder for ready reference: "16. Thus, despite the fact that there is no requirement of proving mens rea specifically, it is clear that the word "conceal" inherently carries with it the requirement of establishing that there was a conscious act or omission on the part of the assessee to hide his true income. This was also the conclusion of the Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218. In a later decision in Union of India v. Dharmendra Textile Processors [2008] 13 SCC 369, the Supreme Court overruled its decision in Dilip N. Shroff (supra). Thereafter, in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) the Court clarified that Dilip N. Shroff (supra) stood overruled only to the extent that it imposed the requirement of mens rea in Section 271(1)(c); however, no fault was fo....
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.... under Section 271(1)(c) was not justified. From the above cases it would be clear that when an assessee has filed revised returns after search has been conducted, and such revised return has been accepted by the A.O., then merely by virtue of the fact that such return showed a higher income, penalty under Section 271(1)(c) cannot be automatically imposed. 19. The whole matter can be examined from a different perspective as well. Section 153A provides the procedure for completion of assessment where a search is initiated under Section 132 or books of account, or other documents or any assets are requisitioned under Section 132A after 31.05.2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment ....
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....n response to notice under s. 153A of the I.T. Act is to be considered as return filed under s. 139 of the Act, as the AO has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under s. 271(1)(c) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under s. 153A, if any." 21. Thus, it is clear that when the A.O. has accepted the revised return filed by the assessee under Section 153A, no occasion arises to refer to the previous return filed under Section 139 of the Act. For all purposes, including for the purpose of levying penalty under Section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. In fact, the second proviso to Section 153A(1) provides that "assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub- section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate." What is clear from this is that Section 153A is in the nature of a second ch....
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.... abates and becomes non-est. Now, it is trite to say that the "concealment" has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139. 15. No quarrel that once the assessment officer accepts the revised return filed under Section 153A, the original return filed under Section 139 abates and becomes non est. Therefore, no penalty can be levied under Section 271(1)(c) of the Income Tax Act. Whereas in the case on hand, there was concealment by the petitioner while filing his first return of income for the assessment year 2012-2013. In fact, the levying of penalty was already dropped in view of the order passed by the tribunal. However, the petitioner is now facing prosecution under Section 276CC of Income Tax Act. That apart, the mens rea of the petitioner is clearly established by the respondent and as such, the above judgment is also not helpful to the case on hand." 38. We are of the considered opinion that the ratio lai....
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....a well-settled principle, fortified by several pronouncements of the Coordinate Benches of this Tribunal, that the deeming fiction embedded in Explanation 5A to Section 271(1)(c) of the Act can be invoked only when the addition or disclosure of income is directly relatable to incriminating evidence unearthed during the course of search. In the absence of such incriminating material, the provisions of Explanation 5A cannot be pressed into service for the imposition of penalty u/s. 271(1)(c) of the Act. Thus, in view of the judicial precedents and the legislative scheme, it follows that in the present case, where the assessee's voluntary disclosure of additional income is not supported by any seized or incriminating document, the penalty provisions u/s. 271(1)(c) of the Act stand inapplicable. In support of this proposition, we place reliance on the following judicial pronouncements. i) The Jaipur Bench of this Tribunal in Ajay Traders v. DCIT [ITA No.296/JP/2014 dated 06.05.2016] has held as under: "4.3. We have heard rival contentions and perused the material on record. It is undisputed fact that during the course of search, no incriminating documents were found and....
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....the notice issued u/s. 153A of the Act, had offered an additional income of Rs. 3,25,88,900/- and since such additional income was not offered on the basis of any incriminating material found during the course of search conducted at the premises of the assessee but rather represents a voluntary disclosure by the assessee, we find no reason to interfere with the findings of the CIT(A) in deleting the penalty of Rs. 1,11,89,533/- levied by the AO u/s. 271(1)(c) of the Act for the A.Y.2015-16. 42. Since we have affirmed the order of the CIT(A) on multiple substantive grounds, we are of the considered view that the technical issue relating to the issuance of the show cause notice u/s. 274 r.w.s 271(1)(c) of the Act, subsequent to the date of the assessment order, is merely of academic relevance. Accordingly, we refrain from rendering any finding thereon. 43. Furthermore, it is pertinent to observe that the Revenue has failed to raise a specific ground of appeal challenging the finding of the CIT(A) that the show cause notice dated 27.03.2022 was invalid, having been issued after the assessment order. Such omission, in our view, renders the entire appeal filed by the Revenue infru....
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....ssuance of first show cause notice by the AO u/s. 274 r.w.s 270A of the Act 27.03.2022 Nature of charge/default specified by the AO in the show cause supra Under Reporting of Income Dates of issuance of subsequent show cause notices u/s. 274 r.w.s 270A of the Act by the AO 29.07.2022 & 26.08.2022 Nature of charge/default specified by the AO in the subsequent show cause notices Under Reporting of Income Date of issuance of final show cause notice u/s. 274 r.w.s 270A of the Act by the AO 15.09.2022 Nature of charge/default specified by the AO in the final show cause notice Under Reporting of Income in consequence of misreporting thereof Date of passing of penalty order u/s. 270A of the Act by the AO 28.09.2022 28.09.2022 27.09.2022 28.09.2022 Amount of penalty levied (Rs.) 62,74,154 92,46,838 1,09,97,688 1,46,69,968 Conclusion of the AO and basis for levying penalty u/s. 270A of the Act Under Reporting of Income in consequence of misreporting thereof in view of the additional income offered by the assessee in the return of income filed u/s. 153A of the Act.....
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....f any mis-representation. 6.5.6 Further, to support the above findings, the following judicial decisions are relied upon viz. In the case of Enrica Enterprises Pvt Ltd Vs DCIT [2024] 163 taxmann.com 105 (Chennai - Trib.) the Hon'ble Jurisdictional Tribunal had observed as follows: It could be seen from the assessment order that there is no observation of 'under reporting of income and under reporting as a consequence of misreporting of income' either in the assessment order or in the show cause notice u/s. 274 r.w.s.270A of the Act specifying the limb of misreporting of income. The addition in the assessment is purely based on sworn statement u/s. 132(4) of the Act, but nothing else. Form the above, it is undisputedly clear that the AO has not made out a case of 'under reporting of income and under reporting as a consequence of misreporting of income', which falls under Clauses (c) & (d) of sub-section 9 of sec.270A of the Act. it is undisputedly clear that the appellant has not misrepresented facts with regard to marketing expenditure. Therefore, we are of the considered view that it is not a case of misrepresentation or supp....
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....pellant and there is no case for even a voluntary surrender as the appellant had during the survey informed about his source of income which was subsequently disclosed in his return of income. In the case of Greenwoods Govt. Officers Welfare Society Vs DCIT [2024] 160 taxmann.com 237 (Delhi - Trib.) the Hon'ble Delhi Tribunal had held that Where fact of earning interest income and miscellaneous income had been duly disclosed by assessee in its accounts and in original return with full details, it could not be alleged that assessee was guilty of under-reporting and/or misreporting of income penalty under section 270A was not exigible In the case of Kavita Jasjit Singh Vs CIT(A) [2023] 157 taxmann.com 756 (Mumbai - Trib.) the Hon'ble Mumbai Tribunal had held that Where during scrutiny assessment proceedings, assessee suo moto furnished a revised computation and offered interest on income tax refund to tax, non-declaration of interest on income tax refund while filing return of income could not be said to be under-reporting of income by assessee within meaning of section270A and, thus, penalty levied under section 270A was to be deleted. In the case of P....
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....ifically arrive at a satisfaction to the effect that, for which charge, AO has initiated penalty proceedings u/s. 270A; 6.5.8 While explaining the above the Hon'ble Tribunal relied upon the decision of the Hon'ble Apex Court in the case of SSA's Emerald Meadows, Madras HC judgment in Babuji Jacob, Karnataka HC in Manjunatha Cotton & Ginning Factory, Delhi HC judgment in Prem Brothers Infrastructure wherein it was held that in view of vague notice without any whisper as to which limb of section 270A is attracted and how ingredients of Section 270A(9) is specified, initiation of penalty under Section 270A for 'under-reporting of income' is not only erroneous, but also arbitrary and bereft of any reason. 6.5.9 The undersigned also relies upon the recent decision of the Hon'ble ITAT Bengaluru rendered in the case of Nateshan Sampath Vs DCIT in ITA No. 1779/Bang/2024, dated 22.1.2025 where in the Hon'ble Tribunal held as under. "5.2 On plain reading of the same, we are of the opinion that when a notice u/s 270A of the Act is issued, the following step ladder should be followed by the AO while levying penalty u/s 270A of the Act. ....
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....ating proceedings u/s 270A of the Act is only ambiguous. Further as evident in the records, the AO at the first instance initiated penalty proceedings u/s 270A of the Act for under reporting of income vide notice dated 27.03.2022 and continued in the subsequent show cause notice (s) issued on 29.07.2022 & 26.08.2022. However, the AO suddenly shifted the stand and issued show cause notice u/s 270A of the Act for under- reporting in consequence of mis-reporting for the first time on 15.09.2022. This sudden shift in stand by the AO affirms the fact that the AO was not clear as to the right levy of charge in the case of the appellant. Therefore, the levy of penalty u/s 270A of the Act for under-reporting of income in consequence of mis-reporting of income is not legally tenable as per various judicial decision(s) discussed as supra. 6.5.11 In view of the above discussion and judicial precedents relied upon, the undersigned is of the considered view that there exists no prima facie case when the AO failed to bring on record of any findings that the appellant has under-reported income in consequence of mis-reporting of income, when the return of income was accepted in toto. Acco....
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....e voluntary admission of concealed income by the assessee. Placing further reliance on the findings recorded in the penalty order, the Ld. DR vehemently contended that the AO has correctly and lawfully invoked the provisions of Section 270A(9) of the Act to levy penalty on account of underreporting of income consequent to misreporting. It was further argued that the Ld. CIT(A) has erred in law and on facts in deleting the penalty, without properly appreciating the nature of misreporting. In light of the above submissions, the Ld. DR prayed that the impugned order of the CIT(A) deleting the penalty be set aside, and the penalty levied by the AO u/s. 270A of the Act be restored and confirmed in toto. 50. Per contra, the Ld.AR placed strong reliance upon the order of the CIT(A) and submitted that the said order is a reasoned and well-founded order. It was argued that the CIT(A), after duly considering and following various judicial precedents, has rightly deleted the penalty levied by the AO u/s. 270A of the Act. According to the ld.AR, the act of the CIT(A) in deleting the penalty by relying upon binding judicial precedents cannot, by any stretch, be regarded as erroneous. Accordi....
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.... 55. The ld.AR submitted that the first show cause notice issued by the AO on 27.03.2022 specified the charge for levy of penalty as "under-reporting of income" within the meaning of Section 270A of the Act. However, in the subsequent and final show cause notice dated 15.09.2022, which was issued merely 13 days prior to the passing of the penalty order, the AO materially altered the charge by stating the proposed default as "under-reporting of income in consequence of misreporting", and thereafter proceeded to levy penalty on the said modified charge. It was contended by the Ld.AR that the jurisdiction to initiate penalty proceedings emanates only from the first show cause notice, and it is the charge specified therein which governs the scope of penalty proceedings. Any subsequent modification of such charge, as attempted by the AO in the final notice, is legally untenable and cannot confer jurisdiction upon the AO to levy penalty for a ground distinct from what was originally initiated. 56. The ld.AR further submitted that the initial notice dated 27.03.2022 initiated penalty proceedings exclusively for under- reporting of income. However, the penalty has ultimately been levied....
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....rther submitted that the vagueness of the notice has caused serious prejudice to the assessee, as he was left in a state of uncertainty and confusion, unable to discern the exact default alleged and, consequently, deprived of an effective opportunity to defend himself. In other words, the assessee was kept in the dark as to the precise charge that necessitated a reply, thereby vitiating the very foundation of the penalty proceedings. 62. In light of the above, the Ld. AR submitted that the CIT(A) has correctly appreciated the legal infirmity and rightly deleted the penalty levied by the AO u/s. 270A of the Act on the basis of an invalid and unsustainable show cause notice. Accordingly, the ld. AR prayed that the appeals filed by the Revenue be dismissed and the order of the Ld. CIT(A) be upheld in toto. 63. We have carefully considered the rival submissions and perused the material on record. The solitary issue for our adjudication is whether the ld. CIT(A) was justified in deleting the penalty imposed by the AO u/s. 270A of the Act for the impugned assessment years. Before proceeding to adjudicate upon the issue under consideration, it is observed that the judgment of the Ho....
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....bligates the competent authority to afford the assessee a fair and reasonable opportunity to present his case and to demonstrate why penalty ought not to be imposed. In this context, the issuance of a proper and legally sustainable notice u/s. 274 of the Act is sine qua non for the valid assumption of jurisdiction to impose penalty. A proper or legally valid notice necessarily connotes that the assessee must be clearly apprised of the precise default, contravention, or charge forming the foundation of the proposed penalty proceedings. Failure to specify the relevant charge or default reflects non- application of mind on the part of the authority and thereby vitiates the very initiation of penalty proceedings. 67. A show cause notice couched in omnibus or vague terms, without delineating the specific charge defeats the purpose of Section 274 of the Act. Such a notice does not enable the assessee to effectively exercise his right of defence, thereby violating the principle of audi alteram partem. Consequently, the imposition of penalty on the basis of such a defective notice is rendered unsustainable in law. Judicial pronouncements of the Hon'ble Courts have consistently held ....
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....dation of the penalty proceedings; therefore, the AO is duty-bound to specify with exactitude the charge alleged against the assessee so that the assessee may effectively meet and rebut the same. A vague or omnibus notice, which merely reproduces the language of the provision without indicating the specific default committed, cannot be sustained in law. 70. In the present case, the impugned notice does not delineate which particular limb or clause of section 270A(9) of the Act is attracted. Sub-section (9) of section 270A of the Act enumerates various instances that amount to "misreporting of income," such as misrepresentation or suppression of facts, failure to record investments, recording of false entries, or claim of expenditure not substantiated, etc. Each of these instances constitutes a distinct and independent ground, carrying serious penal consequences. It was incumbent upon the AO to state in clear and unambiguous terms which of these specific defaults was being attributed to the assessee, along with the manner in which the ingredients of the alleged default stood satisfied in the facts of the case. The failure to so specify renders the notice fundamentally defective. ....
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.... 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting. 9. This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage/incentivize a taxpayer to (i) fast-track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation. 10. Consequently, the impugned order dated 09th March, 2022 passed by Respondent No.1 under Section 270AA (4) of the Act is set aside and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner." 73. We find that the similar issue had come up for consideration before the co-ordinate bench of this Tribunal in Prakashchand Jain v. DCIT in ITA No.68/Chny/2024 dated 07.03.2025, wherein following the another decision of the co-ordinate bench of this Tribunal in Enrica Enterprises Pvt. Ltd. in ITA....
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....that the omission on the part of the Revenue to raise any specific grounds of appeal assailing the order of the CIT(A) in deleting the penalty on account of defective notices renders the Revenue's entire appeal infructuous. Accordingly, we see no reason to interfere with the order of the CIT(A). In the result, the grounds of appeal raised by the Revenue for the AYs 2017-18 to 2020-21 are devoid of merit and are dismissed. Consequently, all the four appeals of the Revenue in ITA Nos. 1651 to 1654/Chny/2025 stands dismissed. ITA No.1655/Chny/2025 (A.Y.2021-22) 75. The present appeal of the Revenue arises from the order dated 13.03.2025 passed by the CIT(A), whereby the CIT(A) has deleted the penalty of Rs. 2,39,98,544/- levied by the AO u/s. 271AAB(1A) of the Act. 76. The brief facts of the case are that the assessee filed his return of income for the impugned assessment year on 10.03.2022, declaring a total income of Rs. 4,24,28,640/ -. Pursuant to the search and seizure action conducted in the case of the assessee on 25.03.2021, the assessment for the year under consideration was mandatorily selected for scrutiny. Accordingly, notice u/s. 143(2) of the Act was issued o....
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....coercion. It was further submitted that the staff members had voluntarily contributed the said donations. The assessee, in his capacity as Vice Chairman, had facilitated the mobilization of such contributions towards the noble cause of supporting the institution. The assessee further submitted before the AO that the aforesaid contributions were genuine donations made by the staff of the Medical College. However, in order to extend co-operation and with a view to buy peace of mind, the assessee voluntarily offered the said sum of Rs. 2,32,50,000/- to tax in the return of income filed for the relevant assessment year. Upon due consideration, the AO found the explanation of the assessee to be acceptable and accordingly completed the assessment on that basis. 82. The AO observed, upon analysis of the forensic extraction of the mobile phone of Shri Sathiaseelan, that certain WhatsApp communications existed between Shri Zubair of M/s JBA and Shri Sathiaseelan. These communications evidenced cash payments made to M/s JBA in respect of materials supplied for the construction of M/s Arunai Medical College. In his sworn statement, Shri Sathiaseelan admitted the veracity of the contents of....
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.... since the same was a subject matter of appeal before the CIT(A). However, the AO observed that the balance sum of Rs. 3,99,97,574/- [i.e. Rs. 4,42,15,889/- minus Rs. 42,18,315/-], which was offered by the assessee and included in the return of income, was not under dispute. The AO further held that such income would not have been offered by the assessee but for the search and seizure operation conducted on 25.03.2021. 89. The AO noted that the assessee had not admitted the aforesaid undisclosed income of Rs. 3,99,97,574/- in the statement recorded u/s. 132(4) of the Act during the course of search, but had admitted the same only during post-search proceedings. Accordingly, the AO concluded that the conditions stipulated under clause (a) of Section 271AAB(1A) were not satisfied, thereby attracting clause (b) thereof, which prescribes levy of penalty at the rate of 60% of the undisclosed income. 90. In view of the above, the AO passed the impugned penalty order u/s. 271AAB(1A) of the Act, vide order dated 22.09.2022, levying penalty of Rs. 2,39,98,544/-, being 60% of the undisclosed income of Rs. 3,99,97,574/ -. 91. Aggrieved of the above order levying penalty u/s. 271AAB(1....
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.... . 6.3.5 On examination of the ground and the relevant written submission made it can be seen that the notice issued for the imposition of penalty is vague and does not specify the exact clause or sub-clause of Section 271AAB under which the penalty is sought to be levied. It is a fundamental requirement that when initiating penalty proceedings, the notice must clearly specify the charge under the relevant provisions of the law to ensure the assessee is aware of the specific violation or conduct that is being penalized. As per the provisions of section 274(1) of the Act, the assessee must be given a reasonable opportunity to respond to the charge levelled against him. However, the notice in this case does not identify the particular clause of Section 271AAB of the Act that the appellant is being charged with, nor does it provide any context about the alleged undisclosed income. This results in the violation of the principles of natural justice, as the assessee is not apprised of the exact grounds on which the penalty is being levied, depriving him of the opportunity to put forth an effective defence. 6.3.6 Furthermore, the assessment order also fails to p....
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....ce for initiating penalty proceedings was vague as it did not specify the default or the undisclosed income for which the penalty was being levied. The bench followed the ruling in the Manjunatha Cotton & Ginning Factory case and quashed the penalty order. ● Mukund Sharan Goyal vs. Dy. CIT, Jaipur (ITA No. 293/Jp/2018, order dated 23rd September, 2019): On similar facts, the ITAT again held that penalty proceedings initiated without specifying the default attracting the penalty under Section 271AAB were invalid. The notice in that case did not mention the clause under which the penalty was being proposed, thus leading to the penalty being quashed. 6.3.12 These rulings demonstrate a consistent approach across different Benches of the ITAT and courts, reinforcing the view that a penalty notice that fails to mention the relevant provisions under which the penalty is being imposed cannot be sustained. Further several other judgments across different jurisdictions also align with the appellant's contention. ● Vimal Chand Surana vs. DCIT, ITAT Jaipur (ITA No. 304/JP/2018, Decision dated 30th May, 2019). ● Shiv Bhagwan Gupta vs. AC....
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....ch previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner, Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted. Unquote 6.5.5 At the outset, the provisions of Section 271AAB of the Act is applicable when "undisclosed income" is found during a search, and the taxpayer either fails to explain it or provides an explanation that is deemed unsatisfactory. The penalty under this section is imposed when there is a clear finding of "undisclosed income." However, in the present case of the appellant it can be seen that the appellant filed his return of income within the stipulated time frame and disclosed the income voluntarily u/s 139(1) of the Act. The only finding made by the AO in the penalty order vide para 6 is that " it is evident that the asse....
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....lly be deemed as undisclosed income for the purpose of imposing a penalty under Section 271AAB. 6.5.9 The action of AO in imposing penalty is ill placed on account of the lack of concrete evidence to demonstrate that the income was actually received or undisclosed. The undersigned is of the view that undisclosed income typically refers to amounts that are concealed from the tax, such as unexplained investments or expenditures. In this case, the appellant asserts that there is no evidence to suggest that the amount of Rs. 2,32,50,000/- was actually received or that the appellant had concealed it. There was no unrecorded transaction or entry that would qualify this income as "undisclosed income." At this juncture it is appropriate to rely upon the decision in Padam Chand Pungliya vs. ACIT (ITA No. 112/Jp/2018), which highlights that mere disclosure of income during the investigation or in response to a query is not sufficient for the imposition of a penalty under Section 271AAB. The AO must assess the facts thoroughly and ensure that the income disclosed meets the criteria of "undisclosed income" before levying the penalty. 6.5.10 In the recent case of Future Gaming....
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....books of the assessee on the day of search and did not constitute a part of the total income for the relevant year but for the search & therefore they fall under the ambit of 'undisclosed income' as specified in the section 271AAB(1A)." 4. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored." 97. The Ld. DR, strongly relied on the penalty order passed by the AO. It was contended by Ld. DR that the undisclosed income declared by the assessee was solely consequent to the search proceedings and would not have been voluntarily disclosed otherwise. It was accordingly submitted that the AO had rightly invoked and imposed penalty u/s. 271AAB(1A) of the Act. The Ld. DR, therefore, prayed that the order of the Ld. CIT(A) be set aside and the penalty order passed by the AO be restored. 98. Per contra, the Ld.AR raised a preliminary objection contending that the present appeal preferred by the Revenue is rendered infructuous, and any further adjudication thereon would be an exercise in futility....
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.... section 271AAB(1A) read as under :- "(1A) The Assessing Officer [or the Commissioner (Appeals)] may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, if the assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- - (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of sixty per cent of the undi....
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....al is right in observing that the penalty could not have been levied based on such defective notice and more particularly, when the assessee has been strenuously canvassing the jurisdictional issue from the inception. 16. In so far as the decision of the Allahabad High Court in the case of Sandeep Chandak is concerned, the factual position is slightly different. This decision is for the principle that where the assessee, in the course of search, makes a statement, in which, he admits the undisclosed income and specifies the manner, in which, such income has been derived, then the provisions of Section 271AAB of the Act would automatically get attracted. There can be no quarrel over this proposition. But, once the provisions get attracted, it is incumbent on the part of the Assessing Officer to specify as to under which clause in Section 271AAB(1) of the Act, he intends to proceed against the assessee. In the instant case, in the absence of such material in the penalty notice, it has to be held that the notice is defective. 17. The decisions of the Karnataka High Court in the cases of Manjunatha Cotton and Ginning Factory and SSA's Emerald Meadows and the decis....
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.... AO to specify, in the show-cause notice issued u/s. 271AAB(1)/(1A) of the Act, the precise limb, clause, or sub-provision under which penalty proceedings are proposed to be initiated, vitiates the very foundation of such notice. It has been categorically laid down in the below mentioned judicial pronouncements that a notice bereft of such specification suffers from incurable infirmity, as it deprives the assessee of a fair and reasonable opportunity to meet the charge. Consequently, any penalty order passed pursuant thereto stands rendered unsustainable in law, liable to be quashed as invalid and void ab initio. i. Rahul Jain v. DCIT [ITA No.1219/CHANDI/2024 dated 18.08.2025] ii. PCIT v. Industrial Safety Products Private Limited 2023 (7) TMI 241 - Hon'ble Calcutta High Court iii. Giriraj Enterprises v. DCIT [ITA No.427/PUN/2025 dated 24.07.2025] iv. St. Joseph's Educational Trust v. DCIT [2025] 175 taxmann.com 284 (Chennai - Trib) v. Krishnappa Gowder Kalyanasundaram V . DCIT [ITA No.1678/Chny/2024 dated 21.05.2025] vi. Prakash Asphalting & Toll Highways (India) Limited v. ACIT [ITA No.720/Ind/2024 dated 24.02.2025] ....