The addition under the s.68 group has been confirmed and I never showed the income in my return. Is there any discretion left to the AO not to levy the s.271AAC penalty?
On this decision, none. The Hyderabad Bench held that once income of the s.68 to s.69D kind is brought to tax and sustained, and the conditions of the proviso are not satisfied, the levy of the s.271AAC penalty is automatic and mandatory, and the language of the section leaves the AO no discretion.
Decided by the ITAT (Shri Ravish Sood, Judicial Member and Shri Madhusudan Sawdia, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'A' Bench) on 2025-12-19, reported as ITA Nos. 1016 & 1017/Hyd/2025. It bears on section 271AAC, section 115BBE, section 68, section 69, section 69A, section 139 of the Income Tax Act 1961, in Penalty and Cash Credits & Unexplained Money matters.
The library needs the Revenue side of this line as much as the taxpayer side, and this is it. It marks out precisely how much room the section leaves: the only immunity is the proviso, and the proviso has two conditions, that the income be included in a return furnished under s.139 and that the s.115BBE tax be paid on or before the end of the relevant previous year. Where the income never went into any return at all, no argument on the merits of the addition, on bona fides, or on the word "may" in s.271AAC(1) will save the penalty on this reasoning. Set against it, the Mumbai Bench in Anil Kantilal Shah (ITA No. 190/MUM/2026, 8 April 2026) — which I read but have not written up — took the softer route that "may" imports a discretion which must nevertheless be exercised judicially, and upheld the penalty on the facts. The two are not in conflict on outcome but they are on the mandatory-versus-discretionary characterisation, and a practitioner arguing discretion should know the Hyderabad view exists. The practical lesson is that the fight in a s.271AAC case is about the proviso and about whether the income is truly s.68 to s.69D income, not about mitigation.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For AY 2021-22 the assessee filed a return declaring income of Rs 5,34,420. The AO found cash deposits of Rs 38,02,400 in his bank accounts, and identified the purchase of a property for Rs 66,00,000 of which Rs 52,80,000 was funded by a housing loan and Rs 13,20,000 was said to come from the assessee's own sources. The assessee did not respond to the notices issued in the assessment proceedings. The AO made additions under the s.68, s.69 and s.69A group in respect of the cash deposits of Rs 38,02,400 and the Rs 13,20,000 said to have come from the assessee's own sources, and determined the total income at Rs 62,73,320, and levied penalty of Rs 3,99,547 under s.271AAC. The additions had been sustained by the time the penalty appeal came before the Tribunal. The income in question had not been offered in the return of income filed under s.139.
The penalty appeal, ITA No. 1017/Hyd/2025, was dismissed and the penalty of Rs 3,99,547 under s.271AAC upheld. Where the income determined includes income referred to in s.68, s.69, s.69A, s.69B, s.69C or s.69D, the assessee is liable to penalty at ten per cent of the tax payable under s.115BBE, the language of the provision is mandatory and leaves the AO no discretion, and the only immunity is that in the proviso. The assessee not having offered the income in his return under s.139, the conditions of the proviso were not fulfilled, and once the addition was made and sustained the levy became automatic and mandatory.
The Tribunal set out s.271AAC(1) and then its proviso. It read the charging words as mandatory in form: where the income determined includes income of the s.68 to s.69D kind for any previous year, the assessee shall pay by way of penalty a sum computed at ten per cent of the tax payable under s.115BBE, and that language leaves no discretion with the AO once such income is brought to tax. It then identified the proviso as the only immunity the section provides, and set out its two requirements — that the assessee must have included such income in the return of income furnished under s.139, and must have paid the tax in accordance with s.115BBE on or before the end of the relevant previous year. On the facts it was an admitted position that the assessee had not offered the income in the return filed under s.139, so the conditions of the proviso were not fulfilled. From that the Tribunal drew the conclusion that with the addition made and sustained and the proviso unavailable, the penalty followed automatically.
once the addition under the family of section 68 of the Act is made and sustained, and the conditions of the proviso are not satisfied, the levy of penalty under section 271AAC of the Act becomes automatic and mandatory
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Handle my notice → Ask a CA on WhatsAppOn this decision, none. The Hyderabad Bench held that once income of the s.68 to s.69D kind is brought to tax and sustained, and the conditions of the proviso are not satisfied, the levy of the s.271AAC penalty is automatic and mandatory, and the language of the section leaves the AO no discretion. This was decided by the ITAT (Shri Ravish Sood, Judicial Member and Shri Madhusudan Sawdia, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'A' Bench) and bears on section 271AAC, section 115BBE, section 68, section 69, section 69A, section 139 of the Income Tax Act 1961. It is reported as ITA Nos. 1016 & 1017/Hyd/2025. The library needs the Revenue side of this line as much as the taxpayer side, and this is it. It marks out precisely how much room the section leaves: the only immunity is the proviso, and the proviso has two conditions, that the income be included in a return furnished under s.139 and that the s.115BBE tax be paid on or before the end of the relevant previous year. Where the income never went into any return at all, no argument on the merits of the addition, on bona fides, or on the word "may" in s.271AAC(1) will save the penalty on this reasoning. Set against it, the Mumbai Bench in Anil Kantilal Shah (ITA No. 190/MUM/2026, 8 April 2026) — which I read but have not written up — took the softer route that "may" imports a discretion which must nevertheless be exercised judicially, and upheld the penalty on the facts. The two are not in conflict on outcome but they are on the mandatory-versus-discretionary characterisation, and a practitioner arguing discretion should know the Hyderabad view exists. The practical lesson is that the fight in a s.271AAC case is about the proviso and about whether the income is truly s.68 to s.69D income, not about mitigation. If it applies to you, the first step is this: Test the deeming section first. s.271AAC bites only where the income determined includes income referred to in s.68, s.69, s.69A, s.69B, s.69C or s.69D. If the addition was made on some other footing — an estimate, a gross profit addition, a disallowance — the section does not apply at all and that is the stronger ground.
For AY 2021-22 the assessee filed a return declaring income of Rs 5,34,420. The AO found cash deposits of Rs 38,02,400 in his bank accounts, and identified the purchase of a property for Rs 66,00,000 of which Rs 52,80,000 was funded by a housing loan and Rs 13,20,000 was said to come from the assessee's own sources. The assessee did not respond to the notices issued in the assessment proceedings. The AO made additions under the s.68, s.69 and s.69A group in respect of the cash deposits of Rs 38,02,400 and the Rs 13,20,000 said to have come from the assessee's own sources, and determined the total income at Rs 62,73,320, and levied penalty of Rs 3,99,547 under s.271AAC. The additions had been sustained by the time the penalty appeal came before the Tribunal. The income in question had not been offered in the return of income filed under s.139. The matter was decided on 2025-12-19 by the ITAT (Shri Ravish Sood, Judicial Member and Shri Madhusudan Sawdia, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'A' Bench). On those facts the ITAT held as follows. The penalty appeal, ITA No. 1017/Hyd/2025, was dismissed and the penalty of Rs 3,99,547 under s.271AAC upheld. Where the income determined includes income referred to in s.68, s.69, s.69A, s.69B, s.69C or s.69D, the assessee is liable to penalty at ten per cent of the tax payable under s.115BBE, the language of the provision is mandatory and leaves the AO no discretion, and the only immunity is that in the proviso. The assessee not having offered the income in his return under s.139, the conditions of the proviso were not fulfilled, and once the addition was made and sustained the levy became automatic and mandatory.
The Tribunal set out s.271AAC(1) and then its proviso. It read the charging words as mandatory in form: where the income determined includes income of the s.68 to s.69D kind for any previous year, the assessee shall pay by way of penalty a sum computed at ten per cent of the tax payable under s.115BBE, and that language leaves no discretion with the AO once such income is brought to tax. It then identified the proviso as the only immunity the section provides, and set out its two requirements — that the assessee must have included such income in the return of income furnished under s.139, and must have paid the tax in accordance with s.115BBE on or before the end of the relevant previous year. On the facts it was an admitted position that the assessee had not offered the income in the return filed under s.139, so the conditions of the proviso were not fulfilled. From that the Tribunal drew the conclusion that with the addition made and sustained and the proviso unavailable, the penalty followed automatically. In the words reproduced by the source cited on this page: "once the addition under the family of section 68 of the Act is made and sustained, and the conditions of the proviso are not satisfied, the levy of penalty under section 271AAC of the Act becomes automatic and mandatory"
It was decided by the ITAT on 2025-12-19 and is reported as ITA Nos. 1016 & 1017/Hyd/2025. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271AAC, section 115BBE, section 68, section 69, section 69A, section 139, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The penalty appeal, ITA No. 1017/Hyd/2025, was dismissed and the penalty of Rs 3,99,547 under s.271AAC upheld. Where the income determined includes income referred to in s.68, s.69, s.69A, s.69B, s.69C or s.69D, the assessee is liable to penalty at ten per cent of the tax payable under s.115BBE, the language of the provision is mandatory and leaves the AO no discretion, and the only immunity is that in the proviso. The assessee not having offered the income in his return under s.139, the conditions of the proviso were not fulfilled, and once the addition was made and sustained the levy became automatic and mandatory. It arises in Penalty and Cash Credits & Unexplained Money matters, on section 271AAC, section 115BBE, section 68, section 69, section 69A, section 139 of the Income Tax Act 1961, and was decided by Shri Ravish Sood, Judicial Member and Shri Madhusudan Sawdia, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'A' Bench. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the proviso is out of reach, do not spend the appeal on bona fides; the reasoning here forecloses it. Check s.271AAC(2) and make sure no s.270A penalty is running on the same income; the two cannot both stand. Attend to the assessment itself. The penalty here followed additions made in a best-judgment setting where the assessee had not responded to notices, and by the penalty stage the additions had been sustained. The time to contest the deeming characterisation is in the quantum appeal. If you are arguing that the word "may" leaves a discretion, cite the Mumbai Bench view and be ready for this decision to be put against you.
Validity check could not be completed. Validity check could not be completed. I did not search for an appeal against this order or for later treatment of it, and no such check should be assumed. Note a difference of characterisation within the Tribunal that is not resolved by any authority I located: the Mumbai Bench in Anil Kantilal Shah v. ACIT (ITA No. 190/MUM/2026, order dated 8 April 2026, read for this batch but not written up) proceeded on the footing that the word "may" in s.271AAC imports a discretion which must be exercised judicially, whereas this order treats the levy as mandatory. Both upheld the penalty, so the difference has not yet produced conflicting outcomes, but it is a live divergence between benches. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The sentence quoted below came back word for word identical on two separate ?type=print fetches of this order, on two different document IDs for it. The intended exact-phrase index check could not be run — indiankanoon's /search/ endpoint returned HTTP 429 on repeated attempts — so the quote rests on the two matching renders and not on index confirmation. The order records the additions as having been made under s.68/s.69/s.69A without, in the text I could read, allocating particular amounts to particular sections, so the facts below do not attribute amounts to sections. The order refers to the group compendiously as "the family of section 68". Two appeals were before the Tribunal, ITA Nos. 1016 and 1017/Hyd/2025. Both were dismissed: the order reads "In the result, the appeal filed by the assessee in ITA No. 1016/Hyd/2025 is dismissed", "In the result, the appeal filed by the assessee in ITA No. 1017/Hyd/2025 is dismissed", and "To sum up, both the appeals of the assessee are dismissed". The order also sets out s.271AAC(2) verbatim: "No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of the income referred to in sub-section (1)." No aggregate figure for the additions is stated in the order; the component figures are given instead. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The penalty appeal, ITA No. 1017/Hyd/2025, was dismissed and the penalty of Rs 3,99,547 under s.271AAC upheld. Where the income determined includes income referred to in s.68, s.69, s.69A, s.69B, s.69C or s.69D, the assessee is liable to penalty at ten per cent of the tax payable under s.115BBE, the language of the provision is mandatory and leaves the AO no discretion, and the only immunity is that in the proviso. The assessee not having offered the income in his return under s.139, the conditions of the proviso were not fulfilled, and once the addition was made and sustained the levy became automatic and mandatory.
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