Penalty under Income Tax cannot be Sustained Independently when Additions are Deleted: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Agra Bench held that penalties under the Income Tax Act, 1961 cannot survive independently when the additions forming their basis have already been deleted.

The orders passed by the Commissioner of Income Tax (Appeals) were challenged by the Revenue. The CIT(A) deleted penalties imposed on Saurabh Gupta, the assessee for AY 2015-16.

The Assessing Officer had completed assessment under Section 143(3) read with Section 153C pursuant to search proceedings conducted in the BNR Group cases.

The officer treated these amounts as unexplained money under Section69A and added ₹1.75 crore for claimed cash loans received and ₹1.19 crore for cash repayment of such loans.

Based on these additions, the Officer initiated penalty proceedings for violation of Section 269SS and Section 269T. It imposed penalties of ₹1.75 crore under Section 271D and ₹1.19 crore under Section 271E through separate penalty orders.

The CIT(A) deleted the additions of the officer. However, according to the income tax department, the quantum additions were deleted on erroneous findings and that penalty proceedings are independent of the assessment proceedings.

The bench of S. Rifaur Rahman (Accountant member) and Sunil Kumar Singh ( Judicial member) noted that in the case of K.C. Builders vs. ACIT, the apex court held that “ the additions in the assessment order, on the basis of which penalty was levied, are deleted, there remains no basis at all for levying the penalty.”

As per the observations of the appellate tribunal, the penalties cannot be sustained independently when the additions forming the very basis of the penalty proceedings are deleted.

Accordingly, the bench upheld the order of the CIT(A). It dismissed the two appeals filed by the revenue.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates