DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. ETHIRAJULU VAJRAVEL KUMARAN, THIRUVANNAMALAI

ITA 1653/CHNY/2025Status: DisposedITAT Chennai21 October 2025AY 2019-2085 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the penalty order dated 22.09.2022 passed by the AO under Section 271AAB(1A) of the Act for AY 2021-22, imposing a penalty of Rs. 2,39,98,544/-, was legally unsustainable and vitiated due to a defective show-cause notice dated 27.03.2022. The AO failed to specify whether the penalty was proposed under clause (a) or clause (b) of Section 271AAB(1A), which is a mandatory requirement. This omission renders the penalty proceedings fundamentally defective, depriving the assessee of a fair opportunity to respond. The Tribunal relied on the judgment of the Madras High Court in PCIT v. Shri R. Elangovan and various co-ordinate bench decisions, which held that such a failure vitiates the penalty proceedings and renders the penalty order unsustainable. Consequently, the CIT(A) was correct in deleting the penalty, and the Tribunal upheld the CIT(A)'s order. The Tribunal also noted that the Revenue failed to raise specific grounds challenging the CIT(A)'s findings on legal grounds, making the appeal exercise futile. The appeals concerning penalties under Section 271(1)(c) and Section 270A were not explicitly discussed in the provided excerpt, but the overarching result indicates they were also dismissed.

What were the facts?

The Revenue filed six appeals before the Income Tax Appellate Tribunal (ITAT) challenging orders of the Commissioner of Income Tax (Appeals) (CIT(A)) that deleted penalties imposed by the Assessing Officer (AO) under various sections of the Income Tax Act, 1961. The appeals pertain to Assessment Years (AY) 2015-16, 2017-18, 2018-19, 2019-20, 2020-21, and 2021-22. The penalties were levied under Section 271(1)(c), Section 270A, and Section 271AAB. The AO had imposed penalties totaling over Rs. 6.9 million across these assessment years. The ITAT noted a delay of 5 days in filing the appeals by the Revenue, which was condoned due to sufficient cause. The common issues raised in these appeals led to a consolidated order.

What were the issues?

1. Whether the penalty proceedings initiated by the AO under Section 271(1)(c) of the Act for AY 2015-16 are sustainable, considering the assessee's contention that no incriminating material pertaining to the assessee or the relevant assessment year was seized, and that the addition was based on material not belonging to the assessee. 2. Whether the penalty proceedings initiated by the AO under Section 270A of the Act for AYs 2017-18 to 2020-21 are sustainable. 3. Whether the penalty proceedings initiated by the AO under Section 271AAB of the Act for AY 2021-22 are sustainable, specifically concerning the AO's failure to specify which limb (clause (a) or (b)) of Section 271AAB(1A) the penalty was proposed under. Assessee's Contentions: - For AY 2015-16, the assessee argued that no incriminating material was found during the search, the seized material did not belong to the assessee, and the transactions were not referable to AY 2015-16. The assessee also contended that the returned income was accepted without variation, negating the basis for penalty proceedings under Section 271(1)(c). Explanation 5A to Section 271(1)(c) was argued to be inapplicable. - For AY 2021-22, the assessee contended that the penalty notice under Section 271AAB was defective for failing to specify the limb of the provision under which the penalty was proposed. Revenue's Contentions: - The Revenue's specific contentions for each appeal are not explicitly detailed in the provided text, but their appeals challenge the deletion of penalties by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 270A,Section 271AA,Section 250,Section 139(1),Section 143(3),Section 132,Section 153A,Section 143(2),Section 142(1),Section 274,Section 132(4),Section 271AAB(1A)

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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA

Hearing: 03.09.2025Pronounced: 21.10.2025

PER GEORGE GEORGE K, VICE PRESIDENT:

These six appeals filed by the Revenue are directed against different orders of Commissioner of Income Tax (Appeal), Chennai-19, passed under section 250 of the Income Tax Act,

1961 (hereinafter called ‘the Act’). The orders of CIT(A) arise out

-2-: ITA Nos.1650 to 1655/Chny/2025

of orders of AO imposing penalties u/s.271(1)(c) / 270A / 271AA of the Act. T

The order continues below.

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