IN THE INCOME TAX APPELLATE TRIBUNAL COCHINBENCH “DB”, COCHIN BEFORESHRI. INTURI RAMA RAO, ACCOUNTANT MEMBERAND SHRI. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A No.616/COCH/2025 (Assessment Year:2019-20)

Deputy Commissioner of vs Ramachandran Income Tax 54, TC. 37/150, Padma Nagar, East th Central Circle, 4 Floor, Fort, Thiruvananthapuram, Ayakar Bhavan, Kowdiar P.O., Kerala- 695023 Thiruvananthapuram, Kerala- PAN: AAIFJ2379K

695003 APPELLANT RESPONDENT Assessee by : Ms. Divya Ravindran, Adv Respondent by : ShriSanjit Kumar Das, (CIT. DR.)

Date of hearing : 30/10/2025 Date of pronouncement : 19/11/2025

O R D E R

Per Shri Anikesh Banerjee (JM):

The instant appeal of the revenue was filed against the order of the Ld.

Commissioner of Income Tax (Appeal)-3,Kochi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’) for assessment year 2019-20, date of order 19/06/2025. The impugned order was emanated from the order of the Assessment Unit, Income-tax Department (for brevity, the “Ld.AO”) passed u/s 271AAB of the Act, date of order 27/03/2022.

2. Brief facts of the case are that the assessee is a firm and is engaged in business of Textile, Furniture, Home Appliances and Super Market functioning in and around Trivandrum city. A search action u/s 132 is carried out on 17.10.2019 in the case of the assessee along with other entities in the said search it is found that difference in stock value in physical stock and books of account. The assessee admitted the findings on earth during the search proceeding in the return of income. Thereafter, assessment u/s 143(3) r.w.s. 153A of the Act was completed. In consequence to the assessee’s admission of undisclosed income unearth during the search declaring in their return of income and Ld.AO completed the assessment without making any variation with the return of income and the assessed income. Finally, Ld.AO initiated proceeding u/s 271AAB (1A) of the Act on the ground that assessee had not marinated proper stock registered and correct stock value was disclosed only post search. A penalty u/s 271AAB @ 30% was levied on undisclosed income amount to Rs. 15,01,10,619/- which come to Rs. 4,50,33,186/-.Being aggrieved assessee filed the appeal before the Ld. CIT(A). The Ld. CIT(A) considering the order of Hon’ble Apex Court allowed the appeal of the assessee. Being aggrieved the revenue filed an appeal before us.

3. The Ld.DR argued and stated that penalty u/s 271AAB is automatic if the assessee declares the un-discussed income during the search proceeding and same amount was declared in return also after paying of requisite of tax, the penalty u/s 271AAB is inevitable. Ld.DR invited our attention in impugned penalty order para 3 and 4 which is reproduced as below.

“3. In the case of the assessee group, it was seen that, the firm M/s Ramachandran is the entity that controls all purchases and distributions to other entities. M/s Ramachandran was the biggest entity of the group and is responsible for the purchase, hold, and transfer stock to 45 other entities. During the search, physical verification of the stock was carried out with the assistance of the employees of the assessee. It was noted that the book value of the stock was too low compared with the value of the stock held by the assessee of the group. In addition to this, the stockmaintained in the Microsoft Dynamics AX also was showing several discrepancies. The closing value of several items was below zero, indicating that the assessee did not update the stock register, even when the physical stock was available. Sworn statement recorded u/s. 132(4) of the Income Tax Act 1961 brought out the fact that the assessee did not properly maintain his stock book. An excerpt from the statement recorded u/s.132(4) dated 20/10/2019 by the managing partner Shri Balachandran explains the malpractice of the assessee. The Chief of Finance and Accounts was confronted with irregularities of stock maintenance and under