Rajeswara Rao Anne Vs DCIT (ITAT Hyderabad)
Voluntary Disclosure ≠ “Undisclosed Income”: 271AAB Penalty Deleted on ₹24 Lakh
The Hyderabad ‘A’ Bench of the ITAT, in Rajeswara Rao Anne vs DCIT (ITA No. 1438/Hyd/2025, AY 2019-20), deleted the penalty levied u/s 271AAB(1A) on ₹24 lakh which was offered by the Assessee during the course of search. A search u/s 132 conducted on 05.10.2018 resulted in discovery of excess gold jewellery, following which the Assessee admitted ₹24 lakh in statement u/s 132(4) and included the same in the return of income filed u/s 139(1).
The AO taxed the said amount u/s 69A r/w 115BBE and thereafter levied penalty u/s 271AAB(1A). In the quantum appeal, however, the Tribunal had already held that no incriminating material was found in respect of ₹24 lakh and accordingly directed the AO to tax the amount at normal rates and not u/s 115BBE. Despite this categorical finding, penalty proceedings were sustained by the CIT(A).
The Tribunal reiterated that, as per Explanation (c) to section 271AAB, penalty can be levied 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 ₹24 lakh, the basic statutory condition itself failed. Mere admission of income to buy peace or avoid litigation cannot convert disclosed income into “undisclosed income” for the purpose of search penalty. Accordingly, the ITAT directed deletion of penalty u/s 271AAB(1A) and allowed the appeal in full
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
