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Facts
The assessment for AY 2017-18 was completed u/s 153A/143(3) with additions for unexplained cash, expenditure, and investment. Penalty proceedings u/s 271AAB(1) were initiated. After appeals, the CIT(A) directed recalculation of penalty on restricted additions of Rs. 3,00,000/- (unexplained expenditure u/s 69C) and Rs. 1,34,000/- (unexplained cash u/s 68), leading to the current appeal by the assessee.
Held
The Tribunal agreed with the assessee's counsel that the penalty was levied on additions made purely on an estimate basis. Considering this and finding the assessee's conduct not contumacious, the Tribunal held that the penalty is not leviable. The Assessing Officer was directed to delete the penalty.
Key Issues
Whether penalty under section 271AAB(1) can be levied on additions made purely on an estimate basis and when the assessee's conduct is not found to be contumacious.
Sections Cited
271AAB(1), 153A, 143(3), 68, 115BBE, 69C, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘SMC’: NEW DELHI
Before: SHRI SHAMIM YAHYA
ORDER This appeal by the assessee is directed against the order of Learned Commissioner of Income Tax (Appeals)-27, New Delhi, dated 18.07.2023 pertaining to Assessment Year 2017-18.
The issue raised is the levy of penalty u/s 271AAB(1) amounting to Rs.2,60,400/-
Brief facts of the case leading to levy of penalty as under:-
The brief fact of the case are that the assessment in this case was completed u/s 153A/143(3) of the act vide order dated 29.12.2018 at an assessed income of Rs.38,56,280/- after making following additions:= i. Addition of Rs. 9,54,015/- on account of unexplained cash u/s 68 r.w.s. 115BBE of the Act. ii. Addition of Rs. 14,69,250/- on account of unexplained expenditure u/s 69C r.w.s.115BBE of the Act. iii. Addition of Rs. 10,34,018/- on account of unexplained investment u/s 69 r.w.s. 115BBE of the Act.
Penalty proceedings u/s 271AAB(1) of the Act were initiated by the AO for undisclosed income for the A.Y. 2017-18.
4.2 Aggrieved with the assessment order, the appellant filed first appeal before ld. CIT(A). The Id. CIT(A) vide order dated 16.10.2019 in appeal no. 685/18-19 has partly allowed the appeal of the appellant and;
On issue (i) has restricted addition from Rs. 9,54,015/- to Rs. 1,34,000/-. On issue (ii) has restricted addition from Rs. 14,69,250/- to Rs.11,63,100/- On issue (iii) deleted the addition of Rs. 10,34,018/-.
4.3 Subsequently, the AO proceeded with levying of penalty amounting to Rs.7,78,260/- being 60% on the tax sought to be evaded on concealed income of Rs. 12,97,100/- (134000 + 1163100) u/s 271AAB(1) of the Act vide order dated 15.03.2022 on these issues.
4.4 Aggrieved with the order of ld. CIT(A), the appellant had filed second appeal against quantum addition, before the Hon'ble ITAT, Delhi. The Hon'ble ITAT vide order in & 26/Del/2020 dated 23.06.2022 has restricted the addition of Rs. 11,63,100/- to Rs. 3,00,000/- on account of unexplained expenditure u/s 69C of the Act on foreign travelling by observing as under:
8. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the assessee went to UK. It is not also in dispute that the stay of the assesee was of 349 days. The only point of dispute is the earning of the assessee as claimed by him by working during his vacation period in M/s. Comfort Hotel Leicester, though in the paper book the assessee has furnished certain documentary evidences but the same need verification. We are of the considered view that by remanding the matter back to the files of the AO for verification from U.K. will be a cumbersum procedure when the tax revenue involved is very less. Therefore, in the interest of justice we direct the AO to restrict the addition to Rs. 5,00,000/- in A.Y, 2016-17 and Rs. 3,00,000/- in A.Y. 2017-18. This Should meet the ends of justice.
Against the levy of penalty on the aforesaid amount, the assessee has file appeal before the Ld. CIT(A). Against the resultant amount of addition, the Ld. CIT(A) directed for levy of penalty as under:-
“5.4. To conclude, the Assessing Officer is hereby directed to recalculate the amount of penalty u/s 271AAB(1) on: i. Restricted addition of Rs.3,00,000/- u/s 69C of the Act on account of unexplained expenditure incurred on foreign travel; and ii. Restricted addition of Rs.1,34,000/- u/s 68 of the Act on account of unexplained cash. 5. Against this order, the assessee is in appeal before the Tribunal.
I have heard both the parties and perused the records. Before me, the ld. counsel for the assessee submitted that these additions are solely on estimate basis, in such circumstances this penalty is not sustainable in law.
Upon carefully consideration, I agree with the submission of the assessee’s counsel that penalty in this case has been levied on additions which are purely on estimate basis. In these facts and circumstances of the case, in my considered opinion, the penalty is not leviable. More so, the conduct of the assessee is not found to contumacious, hence, I direct the Assessing Officer to delete the penalty.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16th January, 2024.