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2024 (10) TMI 30 - AT - Income TaxLevy of penalty u/s 271AAB (1A)(b) - suo moto disallowance of expenses of personal nature u/s 37 made by the assessee in the return filed in response to notice issued u/s 153A - HELD THAT - As stated in the earlier part of the order, it is not in dispute that assessee had indeed made suo moto disallowance in the return filed in response to notice issued u/s 153A of the Act. The penalty proceedings u/s 271AAB of the Act had been initiated only pursuant to search assessment completed u/s 153A of the Act on the assessee. In that search assessment, no concealment on the part of the assessee was even found/ detected. In these circumstances, whether penalty u/s 271AAB of the Act could be levied on the assessee is the dispute before us. We find that this issue is no longer res-integra in view of the decision of Neeraj Jindal 2017 (2) TMI 1002 - DELHI HIGH COURT . Hence respectfully following the same, the levy of penalty u/s 271AAB of the Act is hereby deleted.
Issues Involved:
1. Penalty under Section 270A of the Income-tax Act, 1961. 2. Penalty under Section 271AAB of the Income-tax Act, 1961. Detailed Analysis: Issue 1: Penalty under Section 270A of the Income-tax Act, 1961 The appeal in ITA no. 1945/Del/2023 concerns the penalty order dated 30.01.2023 passed under section 270A of the Income-tax Act, 1961 for the assessment year 2017-18. The penalty of Rs. 5,11,281/- was levied by the Assistant Commissioner of Income Tax, Central Circle-4, Delhi. This penalty arose from the quantum assessment proceedings completed under section 153A read with section 143(3) of the Act on 19.09.2021. However, the quantum assessment was quashed by the Tribunal in ITA No. 1298/Del/2021 dated 13.12.2023. Since the quantum assessment was quashed, the penalty has no basis to stand. Consequently, the penalty under section 270A of the Act was canceled, and the ground of the assessee was allowed. Issue 2: Penalty under Section 271AAB of the Income-tax Act, 1961 The appeal in ITA no. 1946/Del/2023 pertains to the penalty order dated 30.01.2023 passed under section 271AAB of the Income-tax Act, 1961 for the assessment year 2018-19. This penalty was initiated following a search and seizure action under section 132 of the Act on 29.05.2018, which led to a search assessment under section 153A read with section 143(3) of the Act. The total income determined was Rs. 2,35,34,275/-, and penalty proceedings were initiated under sections 271AAB(1A)(a) and 271AAB(1A)(b). The assessee revised its return of income in response to notice under section 153A, declaring total income of Rs. 2,23,37,390/-, which included a suo motu disallowance of Rs. 12,30,000/- for personal expenses under section 37. The learned AO held that this sum was detected during the search and thus liable for penalty under section 271AAB(1A)(b). Additionally, the AO disallowed Rs. 1,17,710/- for personal expenses towards salary paid to domestic help and guards, and Rs. 10,79,175/- for business promotion expenses, initiating penalty proceedings under the same section. The Tribunal, in ITA no. 1299/Del/2021 for the assessment year 2018-19 dated 10.05.2023, deleted the disallowances of Rs. 1,17,710/- and Rs. 10,79,175/-. Consequently, the penalty proceedings under section 271AAB(1A)(b) had no basis and were deleted. The remaining issue was the levy of penalty on the suo motu disallowance of Rs. 12,30,000/-. The Tribunal found that no concealment was detected during the search assessment. Citing the decision in Pr.CIT v. Neeraj Jindal (2017) 393 ITR 1 (Delhi), it was held that penalty under section 271AAB could not be levied merely because the assessee declared higher income in the revised return filed under section 153A. The decision emphasized that penalty under section 271(1)(c) is not automatic and requires specific conditions to be fulfilled, including proof of concealment or furnishing of inaccurate particulars. The Tribunal concluded that the penalty under section 271AAB was not justified as there was no conscious act of concealment by the assessee. The appeal of the assessee was allowed, and the penalty under section 271AAB was deleted. Conclusion: Both appeals of the assessee were allowed, and the penalties under sections 270A and 271AAB of the Income-tax Act, 1961, were canceled. The judgments were pronounced in open court on 26.09.2024.
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