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Facts
The assessee filed twin appeals against orders of the CIT(A) concerning assessment years 2015-16 and 2016-17. The appeals involved proceedings under section 271(1)(c) of the Income-tax Act, 1961, relating to penalties levied on additions made on a 'protective' basis.
Held
The Tribunal noted that the Assessing Officer first assessed the assessee on a 'protective' basis and then recommended a 'substantive' assessment. Following the precedent in Lalji Haridas Vs. ITO (1961), the Tribunal held that this dual approach of assessment is not sustainable in law.
Key Issues
Whether penalties levied under section 271(1)(c) based on protective additions followed by substantive assessment are sustainable in law.
Sections Cited
271(1)(c), 271(1)(c)
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Income Tax Appellate Tribunal, DELHI BENCH: “SMC” NEW DELHI
Before: SHRI SATBEER SINGH GODARA
Date of hearing 09.02.2026 Date of pronouncement 09.02.2026 ORDER These assessee’s twin appeals & 3345/Del/2024 for assessment years 2015-16 and 2016-17, arises against the Commissioner of Income Tax (Appeals)-29 [in short, the “CIT(A)”], New Delhi’s orders, both dated 22.05.2024 passed in case nos. CIT(A), Delhi-29 10586/2014-15 and 10952/2015-16, involving proceedings under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively. Heard both the parties. Case file perused.
It transpires during the course of hearing with the able assistance coming from both the parties that the learned lower appellate authorities have levied section 271(1)(c) penalties; involving varying sums, assessment year-wise, respectively, regarding the corresponding quantum additions of accommodation entry commission made on “protective” basis in the assessments itself.
This being the clinching factual position, the Revenue could hardly dispute that the learned Assessing officer’s identical quantum findings had first assessed the assessee on “protective” basis and then recommended the “substantive” assessment to be framed in the appropriate cases. This tribunal is of the considered view in light of Lalji Haridas Vs. ITO (1961) 43 ITR 387 (SC). that such a course of even quantum assessment on protective basis first followed by the substantive one itself is not sustainable in law. Be that as it may, the fact however remains that the assessee/appellant is aggrieved against penalty proceeding. Both these impugned penalties are hereby deleted in very terms.