Penalty u/s 271AAB of the Income Tax Act is not mandatory or automatic

Prafulla Shashikant Vaidya Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that the levy of penalty under section 271AAB of the Income Tax Act is not mandatory or automatic and same needs to be examined depending upon the facts and circumstances of the case.

Facts- There was search action on the ‘Valuable Group’ and a consequential search was carried out at the premises of the assessee. During the course of search, jewellery of Rs. 2,14,53,102/- was found and Rs.1,55,54,889/- and cash of Rs. 29.08 lakhs were found, out of which Rs. 27 Lakh was seized.

During the course of assessment, the assessee submitted bills for jewellery and also explained cash belongs to M/s Meghabites, a proprietary concern of his wife, and in support of the same he submitted a sales tax return of the said firm where cash sales duly reflected. However, AO has not accepted the explanation and added the amount of Rs. 66,48,000/- as declared in the statement by Shri Narendra Hete.

Later, AO issued notice for penalty u/s. 274 of the Income Tax Act for levying penalty u/s. 271AAB (1) of the Act.

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