Srinivas Chowdary Vallabhaneni Vs DCIT (ITAT Hyderabad)
Peace-Making Disclosure Can’t Trigger Search Penalty: Search Admission Alone Not Enough—No Incriminating Material, No 271AAB Penalty
The Hyderabad ‘A’ Bench of the ITAT, in Srinivas Chowdary Vallabhaneni vs DCIT (ITA No. 1461/Hyd/2025, AY 2019-20), deleted the penalty u/s 271AAB(1A) levied on ₹28 lakh offered by the Assessee during the course of search. A search u/s 132 was conducted on 05.10.2018, pursuant to which the Assessee filed return admitting total income of ₹98.03 lakh, including ₹35 lakh offered during search. The AO treated the entire amount as undisclosed and invoked section 69B r/w section 115BBE, later initiating penalty proceedings u/s 271AAB(1A).
In the quantum proceedings, the Tribunal had already held that only ₹7 lakh (cash found during search) could be taxed u/s 69B r/w 115BBE and that no incriminating material whatsoever was found for the balance ₹28 lakh, which was directed to be taxed at normal rates. Despite this categorical finding, the AO levied penalty on ₹28 lakh, which was upheld by the CIT(A).
The Tribunal reiterated that, as per Explanation (c) to section 271AAB, levy of penalty is possible only where income qualifies as “undisclosed income”, i.e., income represented by money, bullion, jewellery, documents or entries found during search. In the absence of any incriminating material relating to ₹28 lakh, the statutory condition itself failed. Mere voluntary disclosure to buy peace or avoid litigation cannot convert disclosed income into “undisclosed income” for penalty purposes. Accordingly, the ITAT directed deletion of penalty u/s 271AAB(1A) in respect of ₹28 lakh and allowed the appeal in full
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
