Section 271AAC Penalty Unsustainable After Assessment Is Quashed: ITAT Delhi

Ritu Tuli (through legal heir Sh. Sandeep Tuli) Vs DCIT (ITAT Delhi)

In the case of Ritu Tuli (through legal heir Sh. Sandeep Tuli) Vs DCIT, the Income Tax Appellate Tribunal (ITAT), Delhi, allowed the assessee’s appeal against penalty levied under Section 271AAC(1) of the Income Tax Act for Assessment Year 2017-18.

The penalty of Rs.8,14,987 was imposed in relation to additions of Rs.81,49,875 made under Sections 68/69 read with Section 115BBE in an assessment completed on 31.12.2022. The Commissioner of Income Tax (Appeals) had upheld the penalty order.

During the hearing before the Tribunal, no one appeared on behalf of the assessee, and the matter proceeded ex parte. The Departmental Representative argued that the penalty had been correctly levied and sustained by the lower authorities.

However, the Tribunal noted that the assessee’s quantum appeal in ITA No.2016/Del/2023 had already been allowed by a coordinate bench through order dated 31.12.2024. In that order, the Tribunal had quashed the Section 153C assessment itself.

Considering that the assessment forming the basis of the penalty no longer survived, the Tribunal held that the penalty under Section 271AAC(1) had no basis to continue. Accordingly, the Tribunal directed deletion of the penalty and allowed the assessee’s appeal.

FULL TEXT OF THE ORDER OF ITAT DELHI

This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)-24, [in short, the “CIT(A)”], New Delhi’s DIN and order no. ITBA/APL/M/250/2024-25/1070712743(1), dated 28.11.2024 involving proceedings under section 271AAC(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).

2. Case called twice. None appears at the appellant’s behest. She is accordingly proceeded ex-parte.

3. Learned Departmental Representative vehemently argues during the course of hearing that both the lower authorities herein have rightly levied section 271AAC(1) penalty of Rs. 8,14,987/- in the assessee’s hands, pertaining to the corresponding sections 68/69 r.w.s. 115BBE addition @ 10% of the addition of Rs. 81,49,875/- made in the course of assessment framed on 31^st December, 2022 and upheld in the CIT(A)’s order dated 17^th May, 2023.

4. A perusal of the case file, however, indicates that the assessee had preferred her quantum appeal ITA No. 2016/Del/2023 before the tribunal which already stands accepted in the learned coordinate bench’s order dated 31.12.2024, thereby quashing section 153C assessment itself framed on 31^st December, 2022 (supra). This being the clinching factual position, we hereby conclude that the impugned penalty has no legs to stand in very terms. The same is directed to be deleted therefore.

5. This assessee’s appeal is allowed in above terms.

Order pronounced in the open court on 13^th May, 2025