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Facts
The assessee challenged the levy of penalty under Section 271AAC for AY 2017-18. The addition leading to the penalty was made under Section 69 concerning an immovable property, partly in the assessee's name. However, the addition under Section 69 was deleted by the CIT(A) in quantum proceedings.
Held
The penalty under Section 271AAC is consequential to the income addition. Since the addition under Section 69 was deleted by the CIT(A) and the revenue did not appeal this deletion, the foundation for the penalty no longer exists. Therefore, the penalty cannot be sustained.
Key Issues
Whether penalty under Section 271AAC is sustainable when the addition on which it was based has been deleted in quantum proceedings.
Sections Cited
250, 271AAC, 69, 271AAB, 115BBE
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Before: SHRI VIKRAM SINGH YADAV & SHRI RAHUL CHAUDHARY
O R D E R PER VIKRAM SINGH YADAV, AM:
This appeal filed by the assesseeemanates from the order passed under Section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the learned Commissioner of Income-Tax, National Faceless Appeal Centre*in short, ‘CIT(A), NFAC’+, Delhi, dated 22.09.2025 for the Assessment Year 2017-18, wherein the assessee has challenged the sustenance of levy of penalty u/s. 271AAC of the Act.
During the course of hearing, the ld. AR submitted that the addition has been made by the AO u/s. 69 of the Act in respect of investment made in an immovable property primarily in the name of the assessee’s father and the assessee name was also added as a joint owner of the said property. It was submitted that in the quantum proceedings, the addition so made u/s. 69 of the 2017-18 RishirajHitendra Bhandari Act have been deleted by the ld. CIT(A) and in this regard, our reference was drawn to the order passed u/s. 250 of the Act dated 21.07.2025 which is available as part of the assessee’s paper book at pages 63-103. It was accordingly submitted that where the addition so made u/s. 69 of the Act no more survives in light of the order in the quantum proceedings and against which, the Revenue is not in appeal, there is no basis for levy of penalty u/s. 271AAC of the Act.
The ld. DR has been heard who has relied on the penalty order so passed by the AO.
We have heard the rival contentions and perused the material available on record. It is a case where the penalty has been levied u/s. 271AAC of the Act. Sub-section (1) of 271AAC of the Act provides that the AO may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that in a case where the income determined includes any income referred to inter-alia section 69 for any previous year, the assessee shall pay by way of penalty, in addition of tax payable u/s. 115BBE of the Act, computed @10% of the tax payable under clause (i) of sub-section (1) of section 115BBE of the Act. The penalty is thus consequential to income determined u/s 69 of the Act. In the instant case, where the addition so made by the AO u/s. 69 stand deleted by virtue of the order passed by the ld. CIT(A) in the quantum proceedings, we find merit in the contention advanced by the ld. AR that the very foundation for levy of penalty no more survives and there is thus no basis left for sustenance of levy of penalty u/s. 271AAC of the Act. In view of the same, the penalty so levied and sustained by the ld. CIT(A) is hereby deleted.
In the result, appeal of the assessee is allowed.