Penalties Voided for Lack of Approval - ITAT Decision

The penalties imposed under section 271AAB for AY 2013-14 and AY 2014-15 were deemed void ab initio and deleted by the ITAT. The court held that the penalties were invalid as they were imposed without prior approval under section 274(2) of the Act. Consequently, both appeals by the Assessee were allowed, and the penalties for both assessment years were set aside.

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Issues:
- Appeal against penalty under section 271AAB for AY 2013-14 and AY 2014-15.
- Validity of penalty imposition without prior approval under section 274(2) of the Act.

AY 2013-14:
The assessee appealed against the penalty under section 271AAB for AY 2013-14, arguing that the penalty was not applicable as the undisclosed income was declared under section 132(4) of the Income Tax Act, and the tax was paid before the specified date. The Assessing Officer imposed a penalty of Rs. 20,00,000, which was upheld by the CIT(A). The CIT(A) found that the appellant failed to substantiate the manner of deriving the undisclosed income, leading to the penalty being deemed sustainable. The assessee further contended that the penalty was void ab initio as the Assessing Officer did not obtain prior approval under section 274(2) of the Act. The ITAT held that as per the Act, the penalty under section 271AAB could not be imposed without prior approval from the Joint Commissioner, which was not obtained in this case. Therefore, the penalty levied for AY 2013-14 was deemed void ab initio and was deleted.

AY 2014-15:
The facts for AY 2014-15 were similar to AY 2013-14, with the only difference being the amount of penalty imposed. The ITAT applied the same reasoning as in AY 2013-14 and concluded that the penalty imposed for AY 2014-15 was also void ab initio due to the absence of prior approval under section 274(2) of the Act. Consequently, the penalty levied for AY 2014-15 was also deleted. In conclusion, both appeals by the Assessee were allowed, and the penalties under section 271AAB for both AYs were deemed void ab initio and were deleted.

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