Penalty under section 271AAC(1) fails where no income remains assessable under section 115BBE.

Penalty under section 271AAC(1) depends on tax payable on income assessed under section 115BBE. Where the quantum addition was substantially deleted and the surviving amount was held not assessable under section 115BBE, the statutory foundation for penalty disappeared. In the absence of assessable income falling within section 115BBE, penalty under section 271AAC(1) could not be sustained and was held not leviable.

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Issues: Whether penalty under section 271AAC(1) of the Income-tax Act, 1961 was leviable after the quantum addition was substantially deleted and the remaining income was held not assessable under section 115BBE of the Income-tax Act, 1961.

Analysis: Penalty under section 271AAC(1) is computed with reference to tax payable on income assessed under section 115BBE. Once the quantum appeal resulted in deletion of the major addition and the surviving amount was held not assessable under section 115BBE, the statutory basis for imposing penalty under section 271AAC(1) ceased to exist. In the absence of assessable income falling within section 115BBE, the penalty could not survive.

Conclusion: The penalty under section 271AAC(1) was not leviable and was quashed in favour of the assessee.

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