Prabhat Kumar Rastogi Vs ITO (ITAT Delhi)
ITAT Delhi: Penalty u/s 271B deleted as quantum assessment set aside – No basis survives for levy
Delhi ITAT deleted penalty u/s 271B, holding that once the quantum assessment forming the very basis of penalty had been set aside, the penalty could not survive.
Assessee, an individual trader, had declared income of ₹3,19,040/-. AO, during scrutiny for demonetization-period deposits, treated total bank credits of ₹2.34 crore as turnover, applied 28% profit rate, & levied penalty of ₹1,17,258/- u/s 271B for failure to get accounts audited u/s 44AB. CIT(A) upheld the penalty stating that the assessee failed to substantiate that the bank deposits were not business receipts.
Before ITAT, Assessee pointed out that in quantum proceedings, CIT(A) had set aside the earlier ex parte assessment u/s 144 and, in the fresh assessment dated 03-09-2025, the AO accepted the returned income. Therefore, there remained no valid assessment sustaining the turnover finding on which penalty was based.
ITAT agreed, observing that once the original assessment is annulled or replaced, any penalty dependent on it automatically lapses. Since the AO himself accepted the returned income in the remand assessment, there was no default u/s 44AB. Accordingly, the Tribunal deleted the penalty of ₹1,17,258/- & allowed the appeal in full.
