Ten per cent of the tax payable under s.115BBE, under s.271AAC — and s.271AAC(2) shuts out the s.270A penalty on the same income, so it is one or the other, not both. In a search case s.271AAB displaces both: 30% of the undisclosed income where it was admitted in the s.132(4) statement, substantiated, and the tax with interest paid and the return filed by the specified date, and 60% otherwise. Section 271AAB is switched off for searches initiated on or after 1 September 2024. There is an escape from s.271AAC that is easy to miss: no penalty if the income was included in the return and the s.115BBE tax paid on or before the end of the relevant previous year.
**Section 271AAC, in terms.** "The Assessing Officer may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of ten per cent of the tax payable under clause (i) of sub-section (1) of section 115BBE".
The opening words do two jobs. They override the rest of the Act, and they expressly subordinate s.271AAC to s.271AAB. So where a search penalty is available, it takes priority.
**The proviso, which is the only real escape.** "no penalty shall be levied in respect of income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D to the extent such income has been included by the assessee in the return of income furnished under section 139 and the tax in accordance with the provisions of clause (i) of sub-section (1) of section 115BBE has been paid on or before the end of the relevant previous year." Two conditions, and the second is severe: the tax has to be paid before the previous year ends, not by the due date for the return. Offering the income in a return filed months later does not save the penalty if the tax went in with the return.
**No double penalty.** Section 271AAC(2): "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)." And s.271AAC(3) applies ss.274 and 275 — so the same show-cause and hearing requirements, and the same limitation, govern this penalty as govern any other.
**Section 271AAB, the search penalty.** It applies to undisclosed income of the specified previous year where a search under s.132 has been initiated. For a search initiated on or after 15 December 2016 the department's own penalties table gives the rates as "30% or 60% of undisclosed income", for the period 15-12-2016 to 31-08-2024. The 30% limb requires the assessee to have admitted the undisclosed income in the course of the search, established the manner in which it was derived, paid the tax with the relevant interest by the specified date, and furnished a return for the specified previous year declaring that income. Everything else attracts 60%.
The Explanation carries the two definitions that decide most disputes: "specified date" is the due date for furnishing the return or the date specified in the notice under s.153A; and "undisclosed income" is income represented by money, bullion, jewellery, other valuable article or thing, or any entry in books or documents, not recorded before the date of the search or not otherwise disclosed to the tax authorities.
**How the three provisions sit together.** Section 271AAB(2) bars a s.271(1)(c) penalty on the same income. Section 270A(6)(e) excludes from under-reported income "the amount of undisclosed income referred to in section 271AAB". Section 271AAC(1) is expressly subject to s.271AAB, and s.271AAC(2) bars s.270A. The result is a queue: s.271AAB first if there was a search and the income is undisclosed income of the specified previous year; failing that s.271AAC if the addition is under s.68 or the s.69 family; and s.270A only for what is left.
**The quantum, worked out.** Section 271AAC is ten per cent of the tax payable under s.115BBE(1)(i). On a 60% rate that is six per cent of the addition itself, before any surcharge and cess. Section 271AAB is thirty or sixty per cent of the undisclosed income, not of the tax — which is why a search penalty is an order of magnitude larger than the s.271AAC exposure on the same figure, and why the priority order matters commercially and not just doctrinally.
**Searches from 1 September 2024.** Section 271AAB does not apply where a search under s.132 is initiated on or after 1 September 2024; those searches go into the restored block assessment regime under Chapter XIV-B, which carries its own penalty in s.158BFA. This library holds a separate concept on that regime.
**The notice.** Because s.271AAB carries different rates under different clauses, the show-cause notice has to identify the clause and the rate proposed; two entries in this library record penalties quashed for notices that used the ordinary s.271(1)(c) printed form instead. The same reasoning is available against a s.271AAC notice that does not say which of ss.68 to 69D the addition is said to fall under.
The penalty is the part of the exposure that clients are not told about when the addition is discussed. On a Rs 1 crore addition taxed under s.115BBE the tax is roughly 78 lakh; the s.271AAC penalty adds about six lakh, and if the department can bring the same figure under s.271AAB it adds thirty or sixty lakh instead. It also means the argument against the characterisation — that the receipt is recorded turnover, not unexplained money — is worth more than the quantum argument, because it takes the penalty out along with the rate.
The penalty notice does not say whether I concealed income or filed inaccurate particulars. Does that matter?
Is a valuation you put on an asset 'inaccurate particulars' if the officer disagrees with it?
Must the officer say in the notice that he is invoking Explanation 1?
You surrendered the amount to buy peace and avoid litigation. Does that stop the penalty?
My 148A notice says I never filed a return, but I did. Is that enough to get it quashed?
Can the officer reject a s.270AA immunity application without a hearing and without saying which clause of s.270A(9) applies?
The show-cause notice came a year after the AO referred the matter to the JCIT. Which date starts the s.275(1)(c) clock?
Is a defective s.274 notice always fatal?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.