Penalties under Income Tax Act Voided for Lack of Approval

The appeals challenged penalties imposed under section 271AAB of the Income Tax Act for Assessment Year 2014-15 without prior approval from the Joint Commissioner. The penalties were deemed void abinitio due to the absence of prior approval, leading to their deletion. The court emphasized the mandatory nature of obtaining approval before imposing such penalties. Both appeals were allowed in favor of the assessees, setting aside the penalties. The judgment highlighted the procedural irregularity in imposing penalties under the Income Tax Act and was pronounced on 21.05.2019.

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Issues:
Appeal against penalty under section 271AAB of the Income Tax Act for Assessment Year 2014-15 without prior approval from Joint Commissioner.

Analysis:
The judgment pertains to appeals filed against the orders of the Commissioner of Income Tax (Appeals) regarding the levy of penalties under section 271AAB of the Income Tax Act. The main issue in focus is the absence of prior approval under section 274(2) of the Act before imposing the penalty. The first appeal, ITA No. 265/Chd/2018, challenged the penalty of Rs. 7,00,000 imposed by the Assessing Officer. The assessee contended that the penalty was void abinitio as the Assessing Officer did not obtain prior approval before passing the penalty order. The relevant provision, section 274(2) of the Act, mandates obtaining prior approval from the Joint Commissioner before imposing penalties exceeding a specified amount. The penalty order was passed on 29/09/2016, while approval was granted on 30/09/2016, indicating a procedural lapse. The contention of a typographical error was dismissed, and it was held that the penalty order was void abinitio due to the absence of prior approval. Consequently, the penalty levied under section 271AAB was deemed invalid and deleted.

Moving to ITA No. 266/Chd/2018, the facts mirrored those of ITA No. 265/Chd/2018, with the only difference being the penalty amount. As the issue regarding prior approval remained consistent, the penalty imposed in this appeal was also found to be void abinitio and was subsequently deleted. The judgment emphasized the mandatory nature of obtaining prior approval from the Joint Commissioner before imposing penalties under section 271AAB. Both appeals were allowed in favor of the assessees, and the penalties were set aside. The order was pronounced in open court on 21.05.2019, highlighting the resolution of the appeals concerning the procedural irregularity in imposing penalties under the Income Tax Act.

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