PANKAJKUMAR CHIMANLAL LODHIYA,RAKJOT vs. THE ACIT, CENTRAL CIRCLE-2, RAJKOT, RAJKOT

Facts

A search and seizure action on the assessee led to an assessment where a significantly higher income was determined, resulting in additions related to undisclosed foreign bank accounts, deemed rent, and disallowance of commission. Penalties were initiated under sections 271(1)(c) and 271AAB(1)(c) of the Income Tax Act, 1961. The CIT(A) upheld penalties on certain confirmed additions, which the assessee challenged before the Tribunal, arguing that the penalty notices were defective and additions were based on estimation or later deleted.

Held

The Tribunal held that the penalty notices issued under section 271(1)(c) were defective as they simultaneously charged both "concealment of income" and "furnishing inaccurate particulars," without specifying the exact limb, thus vitiating the proceedings. For penalties under section 271AAB(1)(c), it was held that penalties cannot be levied on additions based on estimation or where the underlying additions themselves have been deleted by the Tribunal, applying the maxim "Sublato fundamento cadit opus." Consequently, all penalties were deleted.

Key Issues

1. Whether a penalty notice under section 271(1)(c) is defective if it charges both "concealment of income" and "furnishing inaccurate particulars" without specifying the applicable limb. 2. Whether penalties can be sustained on additions made on an estimated basis or where the underlying additions have been subsequently deleted.