2019 (4) TMI 1833 - AT - Income Tax

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 ... Levy of penalty u/s 271AAB - no prior approval is taken from the concerned JCIT - assessee at the time of search proceedings u/s 132 had admitted undisclosed income under section 132(4) - HELD THAT:- From the above provisions contained in section 274 of the Act, it is crystal clear that the penalty under section 271AAB of the Act, which falls in Chapter XXI of the Act shall not be imposed by the Assessing Officer until and unless prior approval is taken from the concerned Joint Commissioner of Income Tax (JCIT). The use of word “shall” make it mandatory to take the prior approval of the JCIT / Additional CIT before passing the order imposing the penalty under section 271AAB of the Act. In the present case it is crystal clear from the penalty order passed by the Assessing Officer that the order was passed on 29/09/2016 while the approval from the Additional CIT, Range Ludhiana was accorded vide letter no. 1036 dt. 30/09/2016, which clearly established that the penalty order was passed by the Assessing Officer on 29/09/2016 before taking the approval from the concerned Additional CIT / J.C.I.T. Therefore the penalty order passed by the Assessing Officer for levying the penalty under section 271AAB of the Act was void abinitio. In that view of the matter the impugned penalty levied u/s 271AAB of the Act by the Assessing Officer and sustained by the Ld. CIT(A) is deleted. - Decided in favour of assessee. 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.