2022 (11) TMI 458 - AT - Income Tax

Penalty imposed u/s 271AAA - unexplained cash and unexplained jewellery - HELD THAT - While deciding assessee s quantum appeal, the Tribunal has deleted addition made on account of unexplained cash. Whereas, the addition made on account of unexplained jewellery has been restored back to the AO for fresh adjudication. Thus, additions based on which penalty under section 271AAA was imposed by the AO as of now, do not survive. That being the factual position emerging on record, the penalty imposed under section 271AAA at least for the present, cannot survive. Accordingly, we delete the penalty imposed under section 271AAA - However, it is open for the Assessing Officer to initiate proceeding under section 271AAA if warranted, depending upon the decision to be taken relating to the addition made on account of unexplained jewellery in the fresh assessment to be made by him in pursuance to the direction of the Tribunal. Appeal of assessee allowed.

Summary

Issues:
Appeal against penalty under section 271AAA of the Income-tax Act, 1961 for the assessment year 2013-14.

Analysis:
The appeal was filed by the assessee against the penalty imposed under section 271AAA of the Income-tax Act, 1961 for the assessment year 2013-14. The Assessing Officer had initiated penalty proceedings based on additions made during the assessment, including unexplained jewellery and cash. The Commissioner of Income Tax (Appeals) had confirmed the penalty. However, during the quantum appeal, the Tribunal had deleted the addition related to unexplained cash and sent back the issue of unexplained jewellery for fresh adjudication. As a result, the additions on which the penalty was imposed did not stand valid at the time of the appeal. The Tribunal noted that the penalty under section 271AAA could not be sustained since the basis for the penalty no longer existed due to the deletion and restoration of the additions. Therefore, the Tribunal decided to delete the penalty imposed under section 271AAA of the Act. The Assessing Officer was given the option to initiate fresh penalty proceedings depending on the decision regarding the addition of unexplained jewellery in the new assessment.

This judgment highlights the importance of the connection between the additions made during assessment and the imposition of penalties under section 271AAA of the Income-tax Act. It underscores the need for the additions to be valid and upheld for the penalty to be justified. The Tribunal's decision to delete the penalty in this case was based on the fact that the additions forming the basis of the penalty had been altered during the quantum appeal process. The Tribunal's ruling provides clarity on the requirement for a direct link between the additions and the penalty imposed, emphasizing the significance of accurate assessment procedures in penalty determinations under the Income-tax Act.