The penalty under Section 271AAC(1) of the Income Tax Act is a mandatory legal consequence upon the determination of undisclosed income under Section 115BBE, where the assessee fails to satisfy the statutory proviso requiring pre-emptive disclosure and tax payment, and stands unaffected by the mere pendency of quantum appeals in higher courts.

ORDER

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 01.12.2025 passed by the learned Commissioner of Income-Tax (Appeals) – 51, Mumbai [in short ‘the ld. CIT(A)’], for assessment year 2018-19, in relation to penalty amounting to Rs. 3,29,780/- levied by the Assessing Officer (AO) u/s. 271AAC(1) of the Income Tax Act, 1961 (in short “the Act”). The grounds raised by the assessee are reproduced as under:

1. The Ld. CIT(A) is erred in confirming the penalty U/s 271AAC1 of the Act, as quantum order passed by the Hon, ITAT was passed only on the basis of estimations, WhatsApp chat & third-party discussion only.

2. The Ld. CIT(A) is erred in confirming the penalty U/s 271AAC1 of the Act, as the quantum addition was purely on estimation only & Bonafide explanation was provided by the Appellant. The Ld. CIT(A) is also erred in confirming the penalty as, the income was not actually assessable u/s 115BEE of the Act.

3. The appellant request to delete the penalty confirmed by the Ld. CIT (A).

4. The appellant craves to add, alter or omit any or all of the above grounds of appeal before or at the time of hearing of the appeal.”

2. Briefly stated, facts of the case are that the the assessee, a General Manager with the Aditya Birla Group, was also engaged in the saffron trade. The assessee filed his original return of income for the year under consideration on 02.10.2018, declaring total income at Rs. 13,06,610/-.

3. A search and seizure action u/s. 132 of the Act was carried out at the residence and office of the proprietary concern viz. Om Kesar which was engaged in supplying of Saffron to M/s. Narendra Kumar and Co. (Everest Masala Group). During the search, incriminating digital evidence was recovered from the assessee’s laptop, specifically an Excel sheet indicating "on-money" cash payments of Rs. 42.69 Lakhs made to a builder (M/s Suprashwa Estate) for the purchase of a residential flat, namely Flat C-805, Suparshwa Urbana Old Nagardas Road, Andheri East, Mumbai, over and above the registered agreement value. These entries were further corroborated by ‘WhatsApp’ communications found on the assessee’s mobile device. Consequently, the AO made an addition of Rs. 42.69 Lakhs under Section 69B (Unexplained Investment) and initiated penalty proceedings under Section 271AAC.

4. The quantum addition was challenged by the assessee and traveled up to the Income-tax Appellate Tribunal (in short the ‘Tribunal’) wherein the Tribunal in ITA No.227 and 228/Mum/2023 for assessment year 2018-19 to 2020-21 upheld the order of the ld. CIT(A) and confirmed the addition of Rs. 42.69 lakhs holding that the Excel sheet and WhatsApp chats constituted "incriminating material" that clearly established the payment of unaccounted cash. The Tribunal noted a precise correlation between the carpet area mentioned in the registered agreement and the seized Excel sheet, thereby confirming the addition in its entirety. Relevant finding of the Tribunal(supra) is reproduced as under:

“4. During the course of appellate proceedings before us the ld. Counsel submitted that the amount of Rs.42.69 lac was not the actual amount paid in cash and it was just the projection made by the assessee noted on the excel sheet. The ld. Counsel also submitted that whatsapp messages only referred about the GST refund and not the cash transactions. The ld. Counsel further submitted that the assessee has actually purchased flat for Rs.1.10 crores and the value of the flat as per stamp duty valuation was Rs. 83 lac. The addition was based on mere whatsapp chats and no incriminating material have been recovered. The AO was incorrect in arriving at the concl