Case Law Details
ACIT Vs Saurabh Gupta (ITAT Agra)
The case before the Income Tax Appellate Tribunal Agra involved an appeal by the revenue against the deletion of a penalty imposed under Section 271E of the Income Tax Act, 1961 for Assessment Year 2017–18. The penalty of ₹91,10,400 had been levied for alleged violation of Section 269T, based on an addition made under Section 69A read with Section 115BBE on account of unexplained money. This addition arose from documents seized during a search conducted on 26.09.2017 in a related group case.
The assessee had originally filed a return declaring income of ₹23,99,800, which was processed under Section 143(1). Subsequently, during assessment proceedings under Sections 143(3) read with 153C, the Assessing Officer made the addition of ₹91,10,400 and initiated separate penalty proceedings, resulting in imposition of penalty under Section 271E.
The assessee challenged the penalty before the Commissioner of Income Tax (Appeals), who deleted it on the ground that the underlying quantum addition had already been deleted by an earlier appellate order dated 30.11.2023. The revenue contested this deletion, arguing that penalty proceedings are independent of quantum additions and that the deletion of addition was based on erroneous findings. It was also contended that seized documents and statutory presumptions under Section 292C supported the penalty.
The Tribunal examined the issue of whether the penalty could survive after deletion of the quantum addition. It noted that in the assessee’s own case, the deletion of the addition had already been confirmed by the Tribunal in a prior order dated 13.02.2025. Further, reliance was placed on an earlier Tribunal decision dated 15.01.2026, which held that penalties levied solely on the basis of such additions are consequential in nature.
The Tribunal referred to the principle laid down in K.C. Builders vs. ACIT, where it was held that once the additions forming the basis of penalty are deleted, the foundation of the penalty ceases to exist. It was emphasized that penalty proceedings depend on the validity of the assessment order and the satisfaction recorded therein. If the assessment order is annulled or the additions are deleted, the basis for initiating penalty proceedings is extinguished.
Applying this principle, the Tribunal held that since the quantum addition of ₹91,10,400 had been deleted and such deletion had attained confirmation, the penalty imposed under Section 271E could not survive. The Tribunal rejected the revenue’s contention that penalty proceedings are independent, observing that in this case the penalty was entirely based on the addition which no longer existed.
Accordingly, the Tribunal upheld the order of the CIT(A) deleting the penalty and dismissed the revenue’s appeal. The order was pronounced on 17.04.2026.
FULL TEXT OF THE ORDER OF ITAT AGRA
The appellant revenue has preferred this appeal against the impugned order dated 24.01.2025 passed in Appeal No CIT(A)-IV/KNP/12141/2016-17 by the ld Commissioner of Income Tax, Appeals (hereinafter referred to as the “CIT(A) for A.Y. 2017-18, wherein ld CIT(A) has allowed assessee’s first appeal annulling penalty imposed u/s. 271E of the Income Tax Act, 1961 vide penalty order dated 29.05.2023.
2. The brief facts relating to the appeal state that assessee e-filed original return of income for the A.Y. 2017-18 on 14.12.2017, declaring total income at Rs. 23,99,800/-. The return was processed u/s. 143(1) of the Act.
Further a search and seizure action u/s. 132 of the Act was carried out on 26.09.2017 in BNR Group of cases. The assessment proceedings were completed u/s. 143(3) r.w. section 153C of the Act on 31.12.2022. The addition of Rs. 91,10,400/- was made u/s 69A r.w. section 115 BBE of the Act on account of unexplained money on the basis of documents seized from the premise of one Shri Amit Shukla. The penalty proceedings u/s 271E was separately initiated and the penalty of Rs. 91,10,400/- was imposed u/s. 271E of the Act vide penalty dated 29.05.2023 for the contravention of section 269T of the Act.
3. Aggrieved assessee preferred an appeal before ld CIT(A), who has deleted the aforesaid penalty on the ground that the said addition of Rs. 91,10,400/- made vide assessment order dated 31.12.2022 was deleted vide order dated 30.11.2023 passed by ld CIT (A) in appeal No CIT(A)/KNP/12059/2016-17.
4. Aggrieved, revenue preferred this appeal on the following grounds:
“1. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-IV, Kanpur has erred in deleting the penalty of Rs. 91,10,400/- imposed u/s 271E of the Income Tax Act, 1961 solely on the ground that quantum addition has been deleted by the Ld. CIT (A) vide appellate order dated 30.11.2023 in appeal No. CIT(A)-IV/KNP/12059/2016-17, without appreciating the fact that quantum addition was deleted on erroneous finding on identity differentiation of the person whereas seized documents inventorized as page no. 142 to 145 of LP-3 undoubtedly speak that the person whose name appears as “Saurabh” in the incriminating documents seized from the residence of Shri Amit Shukla, Agra, is the same person assessed by the AO.
2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-IV, Kanpur has erred in deleting the penalty of Rs. 91,10,400/- imposed u/s 271E of the Act, ignoring the fact that provisions of section 292C of the Act are applicable in assessee’s case and the seized documents clearly prove that the assessee has repaid loan of Rs. 91,10,400/- in cash in contravention to the provisions of section 269T rendering him liable for imposition of penalty u/s 271E of the Act.
3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-IV, Kanpur while deleting the penalty has overlooked the facts that penalty proceeding on violation of provisions of section 269T of the Act is independent and distinct proceeding which has no correlation with the quantum addition. Hence, Ld. CIT (A) is not justified in deleting the penalty on the basis of deletion of quantum addition despite the fact that order of Ld. CIT (A) deleting the quantum addition has not attained finality as appeal filed by the department against the impugned order of Ld. CIT (A) is pending for adjudication before the Hon’ble Income Tax Appellate Tribunal.
4. That the above grounds are without prejudice to each other and appellant craves leave to add or amend any other more ground of appeal as stated above as and when needs for doing so may arise.”
5. We have perused the records and heard ld Sr. DR for the appellant revenue and ld representative for the respondent assessee.
6. Ld Sr DR for the appellant revenue has submitted that the quantum addition was deleted by ld CIT(A) on erroneous finding, ignoring the provisions of section 292C of the Act and overlooking the fact that section 269T of the Act is independent and has no correlation with the quantum addition. Ld Sr DR has supported the penalty order and prayed to allow revenue’s appeal.
7. Ld AR for the respondent assessee has submitted that the matter is covered by the order dated 15.01.2026 passed in ITA No. 165/166/Agr/2025 for A.Y. 2015-16 in assessee’s own case, submitting that the impugned order has rightly been passed by the ld CIT(A) and prayed to dismiss revenue’s appeal.
8. The main point for consideration under appeal is as to whether ld CIT(A) has erred in deleting the penalty of Rs. 91,10,400/- imposed u/s. 271E of the Act for the contravention of the provisions of section 269T of the Act.
9. It is not disputed that in the instant case this tribunal, vide order dated 13.02.2025 passed in ITAs 36&37/Agr/2024 (A.Y.s 2015-16 & 2017-18) has confirmed the order dated 30.05.2022 passed by the ld CIT(A), deleting the impugned addition.
10. The relevant Paras 5 & 6 of the order dated 15.01.2026 passed by this tribunal in ITA No 165&166/Agr/2025 (A.Y. 205-16) in assessee’s own case, read as under:
“5. The principal issue for adjudication under appeal is as to whether the learned CIT(Appeals) erred in deleting the penalties when the quantum additions had already been deleted?
6. It is undisputed fact that the additions made by the Assessing Officer have nbeen deleted by the first appellate authority, vide order dated 30.11.2023 passed in Appeal No. CIT (A)-IV/KNP/10331/2014-15, which has been confirmed by ITAT vide order dated 13.02.2025 passed in ITA No. 36 & 37/Agr/2024 for A.Yrs. 201516 & 2017-18. The impugned penalties were levied solely on the basis of those additions and were thus consequential in nature. Ld. CIT(Appeals) relied K.C. Builders vs. ACIT, 135 Taxman 461(SC), wherein Hon’ble Apex Court held that where the additions in the assessment order, on the basis of which penalty was levied, are deleted, there remains no basis at all for levying the penalty. Since the additions forming the very basis of the penalty proceedings are deleted, the very foundation of the penalties collapse. The penalties cannot thus be sustained independently. The law mandates that the Assessing Officer must record satisfaction regarding the alleged violation of sections 269SS and 269T of the Act in the assessment order itself for valid initiation of penalty proceedings under sections 271D and 271E of the Act. When such an assessment order is annulled or set aside by a higher authority, the satisfaction recorded therein also ceases to exist, rendering the penalty proceedings invalid. In view of the above, we find no infirmity in the orders passed by the learned CIT(Appeals) deleting the impugned penalties. Accordingly, both the appeals filed by the Revenue are dismissed.”
11. Respectfully following the aforesaid order of this tribunal, we hold that ld CIT(A) has rightly deleted the impugned penalty. The aforesaid point is accordingly determined in negative against the appellant revenue. The appeal is liable to be dismissed.
12. In the result, the revenue’s appeal is dismissed.
Order pronounced on – 17.04.2026
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