PRATHAM AUTOMOBILES,KANCHEEPURAM vs. ITO, WARD-1, KANCHEEPURAM

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ITA 348/CHNY/2026Status: DisposedITAT Chennai17 June 2026AY 2017-186 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the levy of penalty under Section 271AAC(1) is automatic once an addition is made under Sections 68, 69, 69A, 69B, or 69C. The Tribunal also noted that an order passed under Section 271AAC is not appealable before the CIT(A).

What were the facts?

The assessee, Pratham Automobiles, had an addition of Rs. 6,47,841 made by the AO for unexplained cash deposits during demonetization. This assessment order became final as it was not contested. Subsequently, a penalty was levied under Section 271AAC(1) of the Income Tax Act, 1961.

What were the issues?

Whether the penalty levied under Section 271AAC(1) was justified, and if the appeal before the CIT(A) was maintainable.

Which sections of the Income-tax Act were involved?

Section 271AAC(1),Section 69A,Section 143(3),Section 250,Section 246A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI BENCHES, CHENNAI

Before: HON’BLE INTURI RAMA RAO & HON’BLE SS VISWANETHRA RAVI

For Respondent: Ms. Anitha, Addl.CIT
Pronounced: 17.06.2026

आदेश / ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER: This appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], dated 14.11.2025 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Year 2017-18.

2.

The Assessee raised the following grounds of appeal :

“1. The learned Commissioner of Income Tax Appeals erred in law and on facts in confirming the penalty levied under section 271AAC1 of the Income Tax Act 1961 without properly appreciating the facts of the case the appellants books of account VAT payments and documentary evidences produced by the appellant 2 The penalty under section 271AAC1 is bad in law and unsustainable as the mandatory precondition for invoking the said section namely a valid and sustainable addition under 1 sections 68 69 69A 69B 0R 69C has not been fulfilled The very foundation of the penalty is disputed and unsupported by cogent evidence 3 The learned Commissioner of Income Tax Appeals failed to appreciate that the alleged unexplained amount of Rupees 647841 represents genuine business cash receipts duly recorded in the regular books of account subjected to VAT and forming part of the appellants disclosed turnover Hence invocation of section 69A is wholly unjustified 4 The learned Commissioner of Income Tax Appeal.”

Briefly, the facts of the case are that the appellant is a Partnership 3. Firm engaged in the business of dealing two-wheelers. The return of income for the Assessment Year 2017-18 was filed on 07.09.2019 disclosing income of Rs.3,80,620/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2, Kanchipuram (hereinafter called ‘AO’) vide order dated 30.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 at a total income at Rs.10,47,841/-. While doing so, the Assessing Officer made addition of Rs.6,47,841/- treating the part of the cash deposits in specified bank notes of Rs.17,20,000/- made during the Demonetization Period in the bank account as unexplained money of the appellant u/s.69A of the Act and also initiated penalty proceedings u/s.271AAC of the Act. The said assessment order was not contested in Appellate Forum. The appellant was called upon to show cause as to why an order imposing penalty u/s.271AAC(1) of the Act should not be made, despite the several opportunities the appellant had not filed any response to the show cause notice, therefore, the Assessing Officer proceeded with levy of penalty of Rs.38,870/- u/s.271AAC(1) of the Act vide order dated 17.09.2021.

4.

Being aggrieved by the order levy of penalty, the appellant preferred an appeal before the ld.CIT(A), who vide impugned order confirmed the action of the Assessing Officer as the appellant had not shown any sufficient cause.

5.

Being aggrieved by the order of ld.CIT(A), the appellant filed the present appeal before this Tribunal. The ld.Counsel submits that the Assessing Officer had wrongly invoked the section 69A of the Act while framing the assessment order. He further submits that mere technical breach of law does not entail levy of penalty placing reliance on the decision of Hon’ble Supreme Court Hi. 83 ITR 26 and also CIT Vs. Reliance Petro products Ltd 322 ITR 158.

6.

On the other hand, Learned Sr.DR submits that the assessment order passed by the Assessing Officer contained the penalty and therefore, levy of penalty u/s271AAC(1) is automatic and he provisions of section 273B have no application as the said section does not contain provisions of section 271AAC of the Act.

7.

We heard both the parties and perused the records. We find that the solitary issue that arises for our consideration is whether the ld.CIT(A) was justified in sustaining the penalty u/s271AAC of the Act. Admittedly, the assessment u/s143(3) was completed by the Assessing Officer after making addition of Rs.6,47,841/-. The assessment order attained finality as the appellant chose not to contest the assessment order before the appellate forum.

“Taxation Laws (Second Amendment) Act, 2016: From 1-4-2017: The above section 271AAC inserted by the Taxation Laws (Second Amendment) Act, 2016 with effect from April 1, 2017 provides that where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C, or section 69D (cash credits, unexplained investments, money or expenditure) for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE (at a flat rate of 60 per cent.), a sum computed at ten per cent. of the tax payable under section 115BBE. However, no penalty shall be levied in respect of income referred to in these sections to the extent it has been included by the assessee in his return and the tax in accordance with section 115BBE has been paid on or before the end of the relevant previous year., 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 the provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section./section.”

8.

Mere reading of the provisions of Section 271AAC, it would be evident that levy of penalty u/s.271AAC of the Act is automatic once the income is determined in the assessment including income referred to in sections 68, 69, 69A, 69B and 69C of the Act. The Parliament had not provided that penalty u/s.271AAC of the Act cannot be levied in certain circumstances. Further, we find that an order passed u/s.271AAC is not an appealable order u/s.246A of the Act and therefore, it is not an appealable order before the ld.CIT(A), therefore, ld.CIT(A) had rightly dismissed the appeal is not-maintainable. We do not find any merit in the appeal filed by the assessee.

9.

In the result, appeal filed by the assessee is dismissed. Order pronounced in the open Court on 17th June, 2026.

Sd/- Sd/- (SS VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai; �दनांक / Dated : 17th June, 2026 SGR, Sr.PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT Chennai/Madurai/Coimbatore/Salem. 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “सी” ब�च, चे�नई / DR, ITAT Chennai. गाड� फ़ाइल / Guard File. 5.

GANGADHARA Digitally signed by GANGADHARA RAO SALEELA RAO SALEELA Date: 2026.06.25 17:54:08 +05'30'

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