The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench deleted the penalty imposed under Section 271AAB of Income Tax Act, 1961 on account of cash received by a minor grandson on birthday during search proceedings.
Pawan Satyanarain Jalan, the taxpayer derived income from business in textile in the name and style of M/s. Basant Fabrics. Apart from that, he had income from salary and income from other sources.
Consequently, a notice under Section 143(2) of the Income Tax Act, 1961 for the year under consideration was issued and the same was finalized on 26.02.2021 determining total income of Rs.5,30,59,850/- upon making various additions .
Thereafter the penalty proceedings under Section 271AAB & 271AAC of the Income Tax Act were initiated separately in addition upon issuing notices. The Commissioner of Income Tax (Appeals) confirmed the penalty proceedings of AO.
Subsequently, appeal preferred by the appellant before the Tribunal wherein out of the total addition of Rs.39,45,245/-, Rs.36,95,245/- stood deleted. The addition of Rs.2,50,000/- on account of cash of minor grandson Aveer Ankit Jalan had been confirmed by the Tribunal.
Thereafter, in appeal, the CIT(A) though deleted the penalty made under Section 271AAC, the penalty to the tune of Rs.1,50,000/- on the addition of Rs.2,50,000/- on account of cash of minor grandson has been upheld.Now the appeal filed for against the order of CIT(A).
During the proceedings Chetan Agarwal, the counsel for the assessee submitted that cash found and seized during the search was received on the birthday of a grandson from close relatives needs to be taken into consideration in its proper perspective taking into consideration of the status of the family of the appellant .
Further, when the appellant Group is paying tax more than Rs.2 Crores on yearly basis, no element of doubt could be expressed on such a petty amount in the name of a minor grandson in order to evade taxes as alleged by the authorities below.
Mukesh Jain, Counsel for Revenue, supported the decision of lower authorities.
It was observed by the tribunal that Penalty proceeding is a quasi criminal proceeding. Thus, unless the party acts deliberately in defiance of law, guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation, penalty cannot be imposed.
There was no breach on part of the assessee could be seen from the facts. Thus, where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute which is applicable to the case in hand which ought to have been considered by the authorities below.
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Annapurna Gupta, (Accountant Member) and Madhumita Roy, (Judicial Member) deleted the penalty imposed under Section 271AAB of Income Tax Act on account of cash received by a minor grandson on birthday during search proceedings.
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