Under Section 271AAB(1)(c) of the Income Tax Act, if an assessee admits undisclosed income but fails to substantiate its source, the penalty should be restricted to the minimum rate of 30% unless extraordinary circumstances justify a higher rate.

O R D E R

PER SANDEEP SINGH KARHAIL, J.M.

The assessee has filed the present appeal against the impugned order dated 08.07.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)-48, Mumbai, [“learned CIT(A)”], which in turn arose from the penalty order passed under section 271AAB of the Act, for the assessment year 2013-14.

2. In this appeal, the assessee has raised the following grounds: -

“On the facts and circumstances the learned CIT(A) erred in confirming penalty of Rs.9,94,140/- under section 271AAB of the Income Tax Act.”

3. The solitary grievance of the assessee is against the levy of penalty under section 271AAB of the Act.

4. The brief facts of the case are that the assessee was subjected to search and seizure action under section 132 of the Act on 08.11.2012. During the search at the premises of the assessee, i.e., Room No.303, 3rd Floor, Bherumal House, Sheikh Memon Street, Mumbai, cash of Rs.33,19,096/- was found. In his statement recorded under section 132(4) of the Act, the assessee submitted that the cash found from the premises belongs to him. The assessee further admitted that the cash is unaccounted and undisclosed and accordingly offered it for taxation during the year under consideration. Consequently, cash of Rs. 33,13,800/- was seized out of the cash found of Rs. 33,19,096/-.

5. For the year under consideration, the assessee filed his return of income on 10.01.2014, declaring therein total income of Rs.34,17,720/-, wherein the cash seized from the premises amounting to Rs.33,13,800/- was also declared. The Assessing Officer (“AO”), vide order dated 24.03.2015 passed under section 143(3) of the Act, assessed the total income of the assessee at Rs.57,99,920/- by making an addition of Rs.23,82,200/- on account of undisclosed commission income. In further appeal, the learned CIT(A) partly allowed the appeal filed by the assessee, deleting the addition of Rs. 23,82,200/- made by the AO. The Revenue’s appeal before the Tribunal was dismissed vide order dated 26.07.2018.

6. In the meanwhile, a notice dated 14.02.2019 was issued under section 271AAB of the Act. In view of the fact that during the search and seizure proceedings at the office premises of the assessee, cash of Rs.33,19,096/- was found and the assessee in his statement recorded under section 132(4) of the Act admitted that the cash found from the premises belongs to him and also offered to tax the undisclosed cash of Rs.33,13,800/-, the AO, vide order dated 27.02.2019 passed under section 271AAB of the Act, levied a penalty of Rs.9,94,140/-, being 90% of the undisclosed income.

7. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the penalty levied by the AO under section 271AAB of the Act. Being aggrieved, the assessee is in appeal before us.

8. During the hearing, the learned Authorised Representative (“learned AR”) submitted that as there is no difference between the returned income and the income ultimately assessed in the hands of the assessee pursuant to the appellate orders, no penalty under section 271AAB of the Act can be levied. The learned AR further submitted that if at all, the penalty under section 271AAB of the Act cannot be levied to an extent of 90% of the undisclosed income.

9. On the contrary, the learned Departmental