TaxTMI 
TaxTMI 
2026 (8) TMI 1035
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....132 of the Act carried on in the case of Shri. Chandrasekaran Joseph Vijay and others on 05.02.2020. During the course of search, certain incriminating materials including a green diary were found and seized. The assessee filed his return of income for the AY 2020-21 by admitting a total income of Rs. 76,99,78,660/- on 01.01.2021. Based on the information contained in the seized materials, the AO initiated assessment proceedings by issuing statutory notices. The assessment was completed by the AO by passing an order u/s. 143(3) of the Act dated 28.09.2021 by determining the total income of the assessee as Rs. 115,54,78,660/-, which included the additions of Rs. 2.55 crores and Rs. 36 crores towards undisclosed income. 3. The addition of Rs. 2.55 crores was made by the AO on the ground that the assessee through his associate entity M/s.XB Film Creators had received cash reimbursement of production expenses from M/s.Seven Screen Studios in connection with the film "Master". The AO treated the same as income received by the assessee himself being the producer of the said movie. The transaction was also viewed as being in contravention of sec.269ST of the Act, which prohibits the re....
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....71DA of the Act by passing an order dated 11.07.2023. 6. Aggrieved by the order of the penalty u/s. 271DA of the Act, the assessee preferred an appeal before the ld.CIT(A). During the appellate proceedings, the assessee submitted the following before the ld.CIT(A):- "1. The addition of Rs. 2,55,00,000/- made in the assessment order dated 28.09.2021 revolves around the assumption that the Appellant is the Producer of the Movie titled Master based on certain notings in the dairy referred herein above. 2. The AO had relied upon the photocopy extracted from the mobile phone of Mr E Karthikeyan Vice President of M/s XB Film Creators who is the producer of the movie titled 'Master' and the perusal of the said photocopy demonstrates that the alleged transaction was between the Producer of the movie viz., XB Film Creators and Co Producer viz., Sevenscreen Studios. The name of the Appellant was no where mentioned in the extracted photocopy order to even assume that the Appellant was a party to the alleged transaction of Rs. 2,55,00,000/-. 3. Neither Investigating Officials nor the Assessing Officer has unearthed any evidence for receipt of the alleged s....
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....Further, the ld.CIT(A) also noted that the co-ordinate bench of the Chennai Tribunal vide its order dated 03.12.2024 in ITA No.998/Chny/2023 upheld the findings of the CIT(A) and confirmed the deletion of the addition of Rs. 2.55 crores. Thus, the ld.CIT(A) finds that the concurrent findings of both the authorities conclusively established that the assessee neither received nor was in any manner connected with the alleged cash receipt and deleted the penalty imposed by the competent authority by passing an order dated 20.11.2025 by holding as under:- "6.2.6 It is a settled proposition of law that when the very foundation on which a penalty is levied ceases to exist, the penalty cannot survive. The provisions of section 271DA of the Act can be invoked only upon clear establishment of a cash receipt in contravention of section 269ST of the Act. In the present case, not only is there no independent evidence of any such cash receipt by the appellant, but the addition made in the assessment itself has been nullified by the higher appellate authorities. Consequently, there remains no factual or legal basis for sustaining the penalty levied. 6.2.7 Further, the Range Head....
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....screen shot, revealed that the payments were made by M/s.Seven Screen Studios to M/s. XB Film Creators towards for reimbursement of production expenses in cash. 3. The Ld.CIT(A) erred in holding that penalty u/s 271DA is not leviable when the Tribunal erred in deleting the impugned additions without considering the legal presumption u/s 132(4A) of 1 T Act that the 'contents of such books of account and other documents are true' in respect of the seized material found during the course of search proceedings without rebuttal of the same by the assessee & that the Department has agitated against the same by filing appeal u/s. 260A of the Act before the Hon'ble High Court, Madras. 4. The Ld.CIT(A) failed to appreciate that the material having been found from the premises of the assessee u/s. 132 r.w.s 292C of IT Act the presumption is that (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person & the onus is on the assessee to furnish evidence or explanations to rebut the same. 5. For these grounds and any other ground including amendment of grounds that may be ....
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.... the order of the ld.CIT(A) by dismissing the grounds of appeal of the Revenue. 12. We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material available on record. 13. The short question that arises for our determination is whether the ld.CIT(A) was justified in deleting the penalty of Rs. 2,55,00,000/- levied u/s. 271DA of the Act, in view of the fact that the very addition of Rs. 2.55 crores forming the foundation of the said penalty has been deleted in the quantum proceedings. 14. It is an undisputed fact borne out of the record that the penalty u/s. 271DA of the Act was levied by the Range Head solely on the strength of the addition of Rs. 2.55 crores made in the assessment order dated 28.09.2021, on the allegation that the assessee had received the said sum in cash, through his associate entity M/s.XB Film Creators, from M/s.Seven Screen Studios, in contravention of sec.269ST of the Act. It is equally undisputed that the very addition of Rs. 2.55 crores has since been deleted by the ld.CIT(A)-19, Chennai, vide order dated 26.07.2023 in ITA No.1000/22-23, and that the said deletion has been confirmed by the co-o....
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....ions made in the assessment order, on the basis of which a penalty is levied, are themselves deleted, there remains no basis at all for the penalty and it cannot survive independently of the quantum addition. Though rendered in the context of penalty u/s. 271(1)(c) of the Act, the underlying principle, that a penalty which is wholly consequential upon and referable to a quantum addition cannot outlive the deletion of that very addition, applies with equal, if not greater, force to a penalty u/s. 271DA of the Act, which, unlike penalties u/s. 271D and 271E of the Act that operate independently of the assessment on the footing of the assessee's own books, is directly and solely dependent upon the factual establishment of a cash receipt contravening sec.269ST of the Act. 17. As regards Ground Nos.3 and 4 raised by the Revenue touching upon the presumption available u/s. 132(4A) and sec.292C of the Act, we find no merit therein. The said presumption, by its own terms, operates only qua the person from whose possession or control the books of account, documents or other material are found during the course of search. In the present case, it is not in dispute that the WhatsApp scr....