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Facts
An assessment order dated 31/12/2016 included an addition of Rs. 5,37,00,000/- for unexplained investment, leading to penalty proceedings under Section 271AAB. The CIT(A) reduced this addition to Rs. 1,07,00,000/-, but the quantum appeal against this reduction was subsequently remanded to the AO for fresh adjudication by the Tribunal in ITA No. 553/Del/2018. The current appeal concerns the penalty of Rs. 64,20,000/- levied based on this disputed addition.
Held
The Tribunal ruled that since the underlying quantum addition, which formed the basis for the penalty, has been remanded to the Assessing Officer for fresh adjudication, the penalty proceedings initiated in consequence cannot survive. Therefore, the order upholding the penalty was set aside, with liberty granted to the AO to initiate fresh penalty proceedings after a revised assessment order is passed in accordance with law.
Key Issues
Whether a penalty levied under Section 271AAB of the Income Tax Act, 1961, can be sustained when the quantum addition on which it is based has been remanded by the Tribunal for fresh adjudication to the Assessing Officer.
Sections Cited
Section 271AAB, Income Tax Act, 1961
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
This appeal is filed by the Assessee against the order of Ld.
Commissioner of Income Tax (Appeals)-XXVI, New Delhi [“Ld. CIT(A)” for short], dated 16/10/2019 for the Assessment Year 2015-16.
2. The grounds of Appeal are as under: -
“1. That the Ld. CIT(A) grossly erred in law and facts of the case while upholding penalty of Rs.64,20,000/- levied by Ld. Assessing Officer(AO) u/s 271AAB of the Act.
That the notice issued by AO for initiating penalty u/s 271AAB of the Act is not in accordance with law vis-à-vis not specifically
pointing out the default for which the Ld. AO sought to impose penalty u/s 271AAB of the Act.
3. That the Ld. CIT(A) erred in law and facts of the case while upholding penalty of Rs.64,20,000/- levied by AO u/s 271AAB of the Act without appreciating that no satisfaction was recorded for issuing notice u/s 271AAB of the Act.
4. That the Ld. CIT(A) grossly erred in law and facts of the case while upholding penalty of Rs. 64,20,000/- even when Ld. AO failed to explain how addition made would fall under the meaning of "undisclosed income" as defined in Explanation (c) of Section 271AAB of the Act.
5. That the Ld. CIT(A) grossly erred in law and facts of the case while upholding penalty of Rs. 64,20,000/- without appreciating that the alleged additions made by Ld. AO itself is untenable.
That the Ld. CIT(A) grossly erred in law and facts of the case while upholding penalty of Rs.64,20,000/- without appreciating that the penalty proceedings are independent of assessment proceedings and penalty u/s 271AAB is neither automatic nor mandatory in nature.
7. That the Ld. CIT(A) grossly erred in law and facts of the case while upholding penalty u/s 271AAB of the Act of Rs.64,20,000/- without appreciating that penalty was imposed @60% which is on the higher side being unreasonable and unjustified.
That the Ld. CIT(A) grossly erred in law and facts of the case while upholding penalty of Rs.64,20,000/- without disposing each ground raised before him separately which are independent and without prejudice to each other.
That each grounds mentioned hereinabove are independent and without prejudice to each other.
That the Appellant craves leave to alter, amend, modify, delete, vary and/or add any grounds of appeal at any time hereinafter.”
Brief facts of the case are that, an assessment order came to be passed on 31/12/2016 by making one of the additions of Rs. 5,37,00,000/- on account of unexplained investment and a satisfaction for initiation of penalty proceedings u/s 271 AAB of the Income Tax Act, 1961 (‘Act’ for short) has been recorded and penalty proceedings also been initiated. As against the said assessment order, the Assessee preferred an Appeal before the CIT(A) and in the quantum appeal, the Ld. CIT(A) restricted the addition to Rs. 1,07,00,000/- out of R. 5,37,00,000/- being excess consideration paid in cash vide order dated 28/11/2017. The said order of the Ld. CIT(A) dated 28/11/2017 has been challenged by the Assessee in before the Tribunal. The Co-ordinate Bench of the Tribunal vide order dated 30/07/2024, remand the matter to the file of the A.O. for verification of factual aspect of the matter and to decide the issue afresh in accordance with law.
The Ld. Counsel by placing a copy of the order dated 30/07/2024 in the quantum proceedings has been restored to the A.O. for fresh adjudication, the penalty proceedings initiated in consequence to the said addition will not survive, therefore, sought for allowing the appeal.
Per contra, the Department's Representative relying on the orders of the Ld. CIT(A) and sought for dismissal of the Appeal.
6. Heard. Considering the fact that the Co-ordinate Bench of the has remanded the matter to the A.O. regarding confirmation of addition of Rs. 1,07,00,000/- on account of income from undisclosed sources in respect of purchase of property, the penalty proceedings initiated pursuant to the order of the CIT(A) in sustaining the said addition will not survive. Accordingly, we set aside the order of penalty as well as order of the CIT(A) with a liberty to the A.O. to initiate afresh penalty proceedings in accordance with law after passing the assessment order pursuant to the order of the Tribunal in in accordance with law.
In the result, the Appeal of the Assessee is allowed.