Penalty dependent on deleted quantum additions cannot survive where the basis for undisclosed income no longer exists.

Penalty under section 271AAB could not survive once the quantum additions for cash and jewellery had been deleted in the assessee's quantum appeal. The Tribunal held that the penalty was wholly dependent on those additions, and when the underlying basis for alleging undisclosed income disappeared, there was no separate legal foundation to sustain the penalty. The first appellate authority's confirmation of the penalty was therefore unsustainable, and the penalty was deleted in full.

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Issues: Whether the penalty levied under section 271AAB of the Income-tax Act, 1961, could survive after the quantum additions forming its basis had been deleted.

Analysis: The assessee's search assessment had led to additions towards cash and jewellery, and the penalty was imposed on the footing of alleged undisclosed income arising from those additions. The Tribunal noted that the quantum additions relating to cash and jewellery had already been deleted in the assessee's quantum appeal. Once the additions creating the foundation for the penalty ceased to exist, the penalty could not independently survive. In the absence of any separate legal justification to sustain the penalty after deletion of the underlying additions, the confirmation of penalty by the first appellate authority was unsustainable.

Conclusion: The penalty under section 271AAB was held to be unsustainable and was deleted in full, in favour of the assessee.

Ratio Decidendi: A penalty that is wholly dependent on a quantum addition cannot survive once that addition is deleted and the basis for alleging undisclosed income no longer exists.

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