Once Addition is set aside by the Tribunal, subsequent penalty cannot Survive: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that once addition is set aside by the Tribunal, subsequent penalty cannot survive.

The aforesaid observation was made by the Tribunal when an appeal was preferred before it by an assessee, as against the order dated 29.12.2018 of the Commissioner of Income Tax (Appeals), Gurgaon, confirming the penalty imposed under section 271AAA of the Income-tax Act, 1961, for the assessment year 2013-14.

The facts of the case were that the assessee was a resident individual. A search and seizure operation under section 132 of the Income Tax Act was carried out in case of M/s. SRS group on 09.05.2012.

 Based on information received in course of search and seizure operation, the Assessing Officer issued a notice under section 142(1) of the Act to the assessee calling upon him to furnish his return of income for the impugned assessment year. And in response to such notice, the assessee furnished his return of income on 07.07.2014 declaring income of Rs.9,25,050/-.

 The assessment in case of the assessee was completed under section 153B read with section 143(3) of the Act determining the total income at Rs.33,79,234/, wherein the enhancement in income was due to two additions i.e., the addition on account of unexplained jewellery of Rs.23,54,184 and the addition on account of unexplained cash of Rs.1 lakh.

Though, the assessee contested the additions before the Commissioner (Appeals), they were sustained, following which, based on such addition, the Assessing Officer initiated proceeding for imposition of penalty under section 271AAA of the Income Tax Act and ultimately passed an order imposing penalty of Rs.2,45,418/- under the said provision. And the said penalty imposed, as aforesaid, was also confirmed by learned Commissioner (Appeals). And it is by being aggrieved by the same that the assesse has preferred the instant appeal before the ITAT Delhi.

With Sh. Deepesh Garg and Sh. Somil Agarwal, Advocates for the assesse submitting on his behalf that while deciding the quantum appeal of the assessee, the Tribunal had deleted the addition of Rs. 1 lakh made on account of unexplained cash and restored the issue relating to addition of Rs.23,54,184/- made on account of unexplained jewellery to the Assessing Officer for fresh adjudication, it was contented by the advocates for the assessee that, as on date, the additions based on which penalty under section 271AAA of the Act was imposed do not survive, the penalty imposed should be deleted.

However, with  Ms. Maimun Alam, Sr. DR though contested against the same and relied upon the action of the Revenue, the Departmental Representative could not controvert the factual position explained by the counsel for the assesse, and this being the situation, the ITAT Bench consisting of Anadee Nath Misshra, the Accountant Member, along with  Saktijit Dey , the Judicial Member,observed as follows :

“while deciding assessee’s quantum appeal, the Tribunal in ITA No. 839/Del/2017, dated 30.06.2022 has deleted addition of Rs. 1 lakh made on account of unexplained cash. Whereas, the addition made of Rs.23,54,184/- on account of unexplained jewellery has been restored back to the Assessing Officer for fresh adjudication. Thus, additions based on which penalty under section 271AAA was imposed by the Assessing Officer, as of now, do not survive.”

“That being the factual position emerging on record, the penalty imposed under section 271AAA of the Act of the Act, at least for the present, cannot survive”, allowing the assessee’s appeal the ITAT Bench ruled.

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