Parveen v. ITO (ITA No. 4823/Del/2024)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), in Parveen v. ITO (ITA No. 4823/Del/2024), has quashed a penalty of ₹37,920 levied under Section 271AAC(1) of the Income Tax Act, 1961. This came after the Tribunal had substantially deleted the corresponding quantum addition in a previous appeal and rejected applicability of Section 115BBE to the remaining income.
Background: Reassessment and Addition Under Section 115BBE
The assessee, Parveen, a non-filer residing in Hisar, had deposited ₹6,32,000 in cash during AY 2017–18, which included amounts during the demonetization period. The case was reopened and assessed under Section 147, treating the entire amount as unexplained cash under Section 69, and taxing it under the harsh provisions of Section 115BBE.
Penalty Imposed Under Section 271AAC(1)
Following the confirmation of addition by the CIT(A), the AO levied a penalty of ₹37,920 under Section 271AAC(1), which mandates a 10% penalty on tax payable under Section 115BBE. This penalty was also confirmed by the CIT(A), prompting the present appeal before the ITAT.
Relief in Quantum Appeal Changed the Entire Context
The assessee had already filed a quantum appeal (ITA No. 4745/Del/2024) where the Delhi ITAT SMC Bench granted relief of ₹5,32,000, leaving only ₹1,00,000 as addition. Moreover, based on the Madras High Court’s ruling in SMILE Microfinance Ltd. v. ACIT (W.P. No. 2078/2020), the remaining ₹1 lakh was also held not assessable under Section 115BBE.
Thus, there was no income assessable under Section 115BBE, which is a precondition for invoking penalty under Section 271AAC(1).
ITAT’s Ruling: Penalty Unsustainable
The Bench of Shri Avdhesh Kumar Mishra (AM) and Shri Vikas Awasthy (JM) observed:
“We are of the considered view that the penalty in this case, after the finding of the coordinate SMC Bench in quantum appeal, is not leviable at all as there is no assessable income under section 115BBE of the Act.”
Accordingly, the penalty was quashed and the assessee’s appeal was allowed.
Key Takeaways
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Penalty under Section 271AAC requires confirmed income taxable under Section 115BBE.
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If the quantum addition is deleted or no longer falls under Section 115BBE, the penalty automatically fails.
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Proper service of notice and opportunity to be heard remain critical for valid penalty proceedings.
Conclusion
The ITAT Delhi’s ruling in Parveen v. ITO reinforces the principle that penalty provisions are to be strictly construed, and if the foundation for penalty collapses in quantum proceedings, the penalty cannot stand. This ruling offers relief to genuine taxpayers caught in post-demonetization scrutiny where facts are often misinterpreted.