TaxTMI 
TaxTMI 
2025 (12) TMI 849
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....-21 was passed under section 271AAB of the Act on 27/02/2023. 2. All the appeals have same nature of facts and common issue. So all the appeals were taken together, heard together and are being disposed of by this common order. ITA No.1900/Mum/2025 is taken as lead case for penalty levied U/s 271(1)(c) of the Act. ITA 1900/Mum/2025 (AY 2014-15) 3. The brief facts of the case are that the assessee filed the original return u/s 139(1) of the Act. Subsequently, a search and seizure action 132 of the Act was conducted by the DDIT(Inv), Chandigarh in assessee's case, its associated concerns, directors and related persons on 18/07/2019. Finally, the notice u/s 153A was issued and the assessment was framed u/s 153A with the following additions / disallowances :- 1. Disallowance of "salary & wages" u/s 37(1) Rs. 1,37,72,924/- 2. Disallowance of "Administrative expenses" u/s 37(1) Rs. 1,17,826/- 3. Disallowance u/s 40(a)(ia) Rs. 7,03,277/- 4. Suo moto disallowance of excess depreciation In ROI filed u/s 153A Rs. 4,20,640/- 5. Additional income in the return filed u/s 153A Rs.1,07,84,250/- Rs.2,57,98,917/- The assessee had not challenged....
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.... search, then notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clone (c) of sub-section (1) of this section, be deemed to have concealed the particulars of hit income or furnished inaccurate particulars of such income, [unless- (1) such income is, or the transactions resulting in such income are recorded- (i) in a case falling under clause (a), before the date of the search, and (ii) in a case falling under clause (b), on or before such date. in the books of account, if am, maintained by him for any source of income or such income in otherwise disclosed to the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] before the said date, or (2) he, in the course of the search, makes a statement under sub-section (4) of section 122 the any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the ex....
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....imposed under section 270A. For A.Y. 2017-18, the Ld. AO levied a penalty of Rs.52,94,933/- under section 270A of the Act. The Ld. CIT(A) granted partial relief amounting to Rs.49,23,176/-. The assessee has filed the present appeal challenging the balance penalty of Rs.3,71,757/- sustained by the Ld. CIT(A). The Ld. AR submitted that the quantum additions were made on account of (i) disallowance of salary and wages, (ii) disallowance of administrative expenses, (iii) disallowance under section 40(a)(ia), (iv) suo-moto disallowance of interest in the return of income filed under section 153A, and (v) income declared in the return of income filed under section 153A of the Act. The Ld. CIT(A) deleted the penalty relating to the disallowance under section 40(a)(ia), the suo-moto disallowance of interest in the return filed under section 153A, and the income declared in the return filed under section 153A. The only surviving components for the purpose of penalty are the disallowances pertaining to "salary and wages" and "administrative expenses". The Ld. AR contended that penalty cannot be sustained on mere disallowance of expenditure. It ....
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....s the case may be, but the method employed is such that the income cannot properly be deduced therefrom; (c) the amount of under reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB. 10.2 The Ld. Counsel for the assessee referred to the clause (a) of sub-section 6 and submitted that assessee has duly offered explanation in respect of interest and excess depreciation and suo-motu offered income in the return of income filed in response to section 153A of the Act therefor....
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....in the return of income and provided all material facts to substantiate the explanation. Thus explanation being bonafide in nature no penalty is leviable u/s 270A of the Act. Accordingly, the penalty levied by the Assessing Officer for under reporting of the income u/s 270A of the Act is hereby deleted. 10.4 The Ld. CIT(A) in assessment years 2018-19 and 2019-2020 has followed his finding in assessment year 2017-18. Being identical facts and circumstances, following our finding in AY 2017-18, the penalty levied by the Assessing Officer u/s 270A of the Act in assessment years 2017-18 and 2019-2020 is also hereby cancelled and relevant grounds are accordingly allowed." 6. The Ld. AO levied a penalty of Rs.44,29,729/- under section 271AAB of the Act for AY 2020-21. The Ld. CIT(A) granted partial relief amounting to Rs.2,17,896/-. The assessee has filed the present appeal challenging the balance penalty of Rs.42,11,833/- sustained by the Ld. CIT(A). The Ld. AR submitted that the quantum additions were made on account of 1. Disallowance of "salary & wages" u/s 37(1) Rs. 11,60,000/- 2. Disallowance of "Administrative expenses" u/s 37(1) Rs. 15,42,998/- 3. Disal....
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....tion 132 of the Act. The assessee had accepted the quantum additions; however, the issue before us concerns the sustainability of the penalties levied under sections 271(1)(c), 270A, and 271AAB of the Act across different years. 8. In respect of penalties levied under section 271(1)(c) for AYs 2014-15 to 2016-17, we find merit in the contention of the Ld. AR that the additions arose merely from disallowance of expenditure and income declared in the return filed under section 153A, without any nexus to incriminating material unearthed during search. The co-ordinate bench of the ITAT, Mumbai, in the case of Swaran Nadhan Salaria (supra), has held that Explanation 5A to section 271(1)(c) is attracted only where the assessee is found to be the owner of money, bullion, jewellery, valuable articles, or other tangible assets representing undisclosed income detected during search. In the present case, no such condition is satisfied. The disallowances made by the Ld. AO do not emanate from any seized material. Accordingly, following the ratio of the co-ordinate bench, the penalty levied under section 271(1)(c) is unsustainable and is directed to be deleted. 9. In respect of penalties ....