The Income Tax Appellate Tribunal (ITAT) of Ahmedabad recently ruled on the case of Pawan Satyanarain Jalan Vs Assessing Officer Central. The case pivots around the penalty imposed under Section 271AAB of the Income Tax Act due to cash received by a minor grandson on his birthday, which came under the scanner during search proceedings.
The ITAT order was based on the context that the appellant group had a turnover exceeding Rs. 300 crores in the year under review, with tax payments exceeding Rs. 2 crores annually. The ITAT observed that the penalty amount under contention was relatively small, given the financial status of the appellant group. The Tribunal noted that the cash amount in the minor grandson’s name could not justifiably be seen as an attempt to evade taxes. Also, ITAT considered previous judgments and reiterated that penalty proceedings are quasi-criminal and should be levied only when a deliberate violation of law is observed. In this case, no such deliberate defiance was found.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The instant appeal filed by the assessee is directed against the order dated 15.06.2022 passed by the Ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the penalty order dated 10.02.2022 passed by the CIT, Central Circle-1(2), Ahmedabad under Section 271AAB of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2019-20.
2. The impugned order passed by the Ld. CIT(A)-11, Ahmedabad under Section 271AAB of the Act confirming penalty of Rs.1,50,000/- on addition of Rs.2,50,000/- is under challenge before us.
3. The brief facts leading to the case is this that a search under Section 132 of the Act was conducted in the case of Sankalp Group of Ahmedabad at various premises on 30.10.2018 and subsequent dates. The appellant derived income from business in textile in the name and style of M/s. Basant Fabrics. Apart from that, he had income from salary and income from other sources. Consequently, notice under Section 143(2) of the Act dated 20.02.2020 for the year under consideration was issued and the same was finalized on 26.02.2021 determining total income of Rs.5,30,59,850/- upon making additions to the tune of Rs.39,45,245/- on several counts in the following manner:
|SR.. No.||Addition made in the assessment order||Amount
|Addition deleted by the CIT(A) [In Rs.)||Addition confirmed by the CIT(A) [In Rs.]|
|1.||Addition U/S.69C on account of unaccounted and unexplained cash payments||2,82,00,000||2,82,00,000||0|
|2.||Addition u/s.69A in respect of unaccounted and explained cash receipt||2,00,000||2,00,000||0|
|3.||Addition u/s.69A in respect of gold jewellery etc. weighting 2500 gms||72,50,000||45,70,255||26,79,745|
|4.||Addition u/s.69A in respect of 34 KG of Silver lagdi, silver bars and silver items found from the residence||12,33,500||6,16,750||6,16,750|
|5.||Addition u/s.69A in respect of silver articles weighting 1,460 KG and 7.04 KG found from his bank locker no. 119 &118||2,97,500||1,48,750||1,48,750|
|6.||Addition u/s.69A in respect of cash found and seized during the search||37,34,855||32,34,855||5,00,000|
4. Penalty proceeding under Section 271AAB & 271AAC of the Act were initiated separately on addition upon issuing notices on 26.02.2021 under Section 274 r.w.s. 271AAC of the Act on 19.03.2021 upon the appellant and penalty imposed on 10.02.2022 by the Ld. AO. On the other hand, the quantum order passed by the Ld. AO stood confirmed by the Ld. CIT(A) and finally penalty was also imposed on 10.02.2022 on the additions confirmed by the Ld. CIT(A). Subsequently, appeal preferred by the appellant before the Tribunal wherein out of the total addition of Rs.39,45,245/-, Rs.36,95,245/-stood deleted. The addition of Rs.2,50,000/- on account of cash of minor grandson Aveer Ankit Jalan had been confirmed by the Tribunal. Thereafter, in appeal, the Ld. CIT(A) though deleted the penalty made under Section 271AAC, the penalty to the tune of Rs.1,50,000/- on the addition of Rs.2,50,000/- on account of cash of minor grandson has been upheld. Hence, the instant appeal before us.
5. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record.
6. Upon considering the order passed by the authorities below, we find this particular fact which has also been substantiated by sufficient evidence before the authorities below that the appellant group was having turnover of more than Rs.300 Crores in the year under consideration and the total tax paid by Group is more than Rs.2 Crores in a year. We note that the explanation rendered by the appellant in regard to cash found and seized during the search to the tune of Rs.2.5 Lakhs received on various occasions and on birthday from close relatives needs to be taken into consideration in its proper perspective taking into consideration of the status of the family of the appellant which the authorities below failed to. Moreso, when the appellant Group is paying tax more than Rs.2 Crores on yearly basis, no element of doubt can be expressed on such a petty amount in the name of minor grandson in order to evade taxes as alleged by the authorities below.
7. In support of the case made out by the assessee to this effect that the penalty is not justifiable in this case and also on the count that penalty under Section 271AAB of the Act is discretionary one and not mandatory, the appellant relied upon the judgment passed by the ITAT, Nagpur Bench in case of Chandra Suresh Kothari vs. DCIT, reported in  135 taxmann.com 275 (Nagpur – Trib.) and Hon’ble Apex Court in the case of Hindustan Steel Co. Ltd. vs. State of Orissa, reported in 83 ITR 26 which we have duly considered. We need to consider this fact that Penalty proceeding is a quasi-criminal proceeding. Thus, unless the party acts deliberately in defiance of law, guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation, penalty cannot be imposed. It is a discretionary power on the part of the authorities below to impose penalty which should be exercised judicially and on a consideration of all the relevant factors cantering the issue. Refusing to impose the penalty in a case of minimum penalty prescribed can be said to be justified if it is due to any technical or venial breach of the provisions of law or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute which is applicable to the case in hand which ought to have been considered by the authorities below. Therefore, respectfully relying upon the judgment passed by different High Courts and the Apex Court, we do not find any justification in imposing the impugned penalty of Rs. 1,50,000/- under Section 271AAB of the Act. Considering the entire aspect of the matter, we with the above observation delete the penalty.
8. In the result, assessee’s appeal is allowed.
This Order pronounced on 07/07/2023