IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER Assessment Year: 2013-14 to 2018-19 Assessment Year: 2013-14 to 2018-19 Assessment Year: 2013-14 to 2018-19 Assessment Year: 2013-14 to 2018-19 Assessment Year: 2013-14 to 2018-19 Assessment Year: 2013-14 to 2018-19 Assessment Year: 2013-14 to 2018-19 Assessee by : Shri V Srinivasan, Advocate Revenue by : Shri Subramanian, JCIT Date of hearing : 13.01.2026 Date of Pronouncement : 22.01.2026

O R D E R

PER BENCH:

These 6 appeals, filed by the assessee against the separate order of the learned Commissioner of Income Tax (Appeal) (hereafter- learned CIT(A)) under the provision of section 250 of the Income Tax Act, 1961 (hereafter- the Act), were heard together.

First, we take up ITA No. 1835/Bang/2025 pertaining to AY

2013-14

2. The assessee in the memo of appeal raised multiple grounds numbered 1 to 7 and sub-grounds thereunder, which we, for the sake of brevity are not inclined to reproduce here.

3. The grounds of appeal filed by the assessee are interconnected and pertain to levy of penalty u/s 271(1)(c) of the Act.

4. The brief facts are that the assessee, a partnership firm, is engaged in the business of trading in rice and rice products, wheat and wheat products. The assessee filed its ROI u/s 139(1) of the Act declaring an income of Rs. 28,35,100/- only. A search action u/s 132 of the Act was conducted at the premises of the partners of the assessee.

5. During the search proceedings at the premises of the partners, certain incriminating materials pertaining to various transactions such as loans, purchases were found and seized by the search team. During the assessment proceedings, based on such transactions, the AO was of the opinion that the assessee had undisclosed income from unaccounted cash dealing. On question by the AO about the impugned seized documents, the assessee voluntarily offered an additional income at 1% of total turnover disclosed in the returns of income filed under section 139 of the Act to taxation. Accordingly, the assessee filed ROI in response to the notice issued u/s 153C of the Act and offered an additional income to the tune of Rs. 30,82,166/- i.e. 1% of the total turnover. Further, the Ld. AO accepted the additional income @1% of the total turnover in the assessment framed under section 153C r.w.s. 143(3) of the Act. However, the AO initiated the penalty proceedings u/s

271(1)(c) of the Act for concealment of income by issuing a show cause notice to the assessee.

6. The assessee in response to such show cause notice contended that there was neither concealment of income nor furnishing of inaccurate particulars for the year under consideration. Further, during search and survey proceedings, no undisclosed assets or income belonging to the assessee were found or seized by the AO. Only loose sheets were found by AO, which were explained during search by the Assessee. Additional income at 1% of turnover was voluntarily offered by Assessee on an estimated basis to cover possible discrepancies and to buy peace and avoid prolonged litigation.

6.1 The assessee further submitted that the return filed in response to the notice issued u/s 153C of the Act included the said additional income, which was accepted by the AO without making any further additions or disallowances. Penalty proceedings were initiated mechanically, despite the fact that the assessment was completed by accepting the returned income.

6.2 Further, the assessee submitted that penalty under section 271(1)(c) is not automatic; the word used in the statute is “may” and the AO is required to exercise discretion judiciously. The assessee relied on judicial precedents, including Manjunatha Cotton & Ginning Factory reported in 35 taxmann.com 250 (Karnataka), to submit that penalty proceedings are independent and require clear satisfaction of concealment.

6.3 It was further submitted by the assessee that penalty cannot