Section 271AAB does not grant any immunity from penalty in terms of section 273B

Section 271AAB does not grant any immunity from penalty even if the assessee was able to show some reasonable cause in terms of section 273B of the Act

In a recent judgment Agra ITAT has held that provisions of section 271AAB of income tax Act does not grant any immunity from penalty even if the assessee was able to show some reasonable cause in terms of section 273B of the Act as the provisions of section 273B specifically omits section 271AAB of the Act. 

ABCAUS Case Law Citation:
5032 (2026) (02) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the levy of penalty under section 271AAB of the Income Tax Act, 1961 (the Act).

A search and seizure operation u/s 132 of the Act was conducted in the premises of the assessee. No return of income was filed by the assessee in response to the notice u/s 153A of the Act.

During the course of search and seizure operation, various documents related to the activities of the assessee in respect of trading of land and running of hotel business and also running of petrol pump were found. The assessee during the course of search gave a statement confirming the fact of making investment in various properties and in construction of the properties.

The assessee also submitted that all the investments either made in the name of family members or in his name are invested by him and he will explain the nature and source of such investment on an overall basis. Further, the assessee’s family members comprising of his wife, his son and his daughter-in-law also submitted in their declaration stating on oath that the investments whatever made and found during the course of search in their names, were made by the assessee either as capital or other investment and the same may kindly be considered in the hands of assessee and that they had not made any investments on their own.  Based on all these declarations, the revenue sought to treat all the investments made in the whole family as being made by assessee.

Since, no return of income had been filed by the assessee either prior to the search or in response to the notice under Section 153A of the Act, AO completed the assessments ex parte under Section 144 of the Act for the relevant years making additions for income from petrol pump business, income form sale/purchase of land and income from construction.

Opposing the penalty u/s 271Aab of the Act, the assessee, before the Tribunal took a plea that he had only incurred losses in his businesses and because of his inability in producing the proper books of accounts before the AO to prove the incurrence of losses, he had accepted to the estimated additions made for the various assessment in order to put an end to the litigation given his health condition.

The assessee further submitted that the said additions were accepted by the asesssee only in order to put an end to the litigation as he is not in proper frame of mind to pursue the litigation due to his illness and other reasons detailed in the initial part of the order. Hence the entire additions were made for all the years under consideration only based on estimate basis. It is trite law that no penalty for any concealment or for any undisclosed income could be made for an estimated addition.

The Tribunal observed that a plain reading of the provisions of section 271AAB of the Act would show that once the element of undisclosed income stood accepted by the assessee, there is no leeway provided for the levy of penalty.

The Tribunal observed that the expression ‘undisclosed income’ is defined in the Explanation to section 271AAB of the Act and the transactions of the assessee would squarely fall under the ambit of ‘transactions found in the course of search under section 132 which has not been disclosed to the revenue before the date of search.

The Tribunal opined that the provisions of section 271AAB of the Act does not grant any immunity from penalty even if the assessee was able to show some reasonable cause in terms of section 273B of the Act as the provisions of section 273B specifically omits section 271AAB of the Act.  Hence once the transaction fall within the definition of ‘undisclosed income’ as defined in the Explanation to section 271AAB of the Act,  the levy of penalty under section 271AAB of the Act becomes practically automatic.  

As a result, the Tribunal upheld the levy of penalty for all the assessment years and the grounds raised by the assessee were dismissed.  

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