ITAT Kolkata Partly Relieves Assessee from 60% Penalty under Section 271AAB

Background of the Dispute

This appeal before the Income Tax Appellate Tribunal, Kolkata Bench, arose from an order dated 29.10.2025 passed by the CIT(Appeals)-21, Kolkata under Section 250 of the Income Tax Act 1961. The assessee challenged the imposition of penalty under Section 271AAB at the higher rate of 60% in connection with a search operation conducted under Section 132.

For the relevant assessment year, the assessee had filed a return of income declaring a total income of Rs. 70,12,560/-. Subsequently, a Search & Seizure action under Section 132 was carried out on 18.08.2022 at the assessee’s residence and business premises.

During this search, cash of Rs. 83,26,000/- was detected, out of which an amount of Rs. 75,00,000/- was seized. A show-cause notice was then issued, and in response, the assessee produced the cash book. On reconciliation, the assessee could not satisfactorily explain cash of Rs. 4,14,900/-.

The Assessing Officer treated this unexplained cash of Rs. 4,14,900/- as income under Section 69A and completed the assessment under Section 143(3). The assessee, with a view to avoid further litigation at the quantum stage, chose not to challenge the assessment order in appeal.

Subsequently, penalty proceedings were initiated under Section 271AAB, and the Assessing Officer levied penalty at 60% treating the case as falling under Section 271AAB(1A)(b). The penalty was computed at Rs. 13,70,903/-.

The CIT(A) upheld this levy, prompting the assessee to approach the ITAT.

Core Controversy – Appropriate Rate of Penalty under Section 271AAB

Assessee’s Stand

The learned Authorised Representative (AR) submitted that: