Babli Kukreja vs. ACIT, Central Circle-15, New Delhi: Case Filed for 2008-09 Assessment Year – Dispute Over Penalty Under Section 271(1)(c)

Babli Kukreja vs. ACIT, Central Circle-15, New Delhi: Case Filed for 2008-09 Assessment Year – Dispute Over Penalty Under Section 271(1)(c)

Case Number: ITA 6009/DEL/2019

Appellant: Babli Kukreja, New Delhi

Respondent: ACIT, Central Circle-15, New Delhi

Assessment Year: 2008-09

Case Filed On: 12th July 2019

Order Type: Final Tribunal Order

Date of Order: 7th December 2021

Pronounced On: 7th December 2021

Background of the Case

This case involves an appeal filed by Babli Kukreja, a resident of New Delhi, against the Assistant Commissioner of Income Tax (ACIT), Central Circle-15, New Delhi, for the assessment year 2008-09. The appeal was filed on 12th July 2019, challenging the imposition of a penalty under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was levied following an addition made by the Assessing Officer (AO) during the assessment proceedings, which was subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

Facts of the Case

The appellant, Babli Kukreja, had originally filed her return of income on 20th July 2008, declaring a total income of Rs. 3,08,260. The return was processed under Section 143(1) of the Income Tax Act. However, on 11th November 2010, a search and seizure operation was conducted on the appellant’s premises under Section 132 of the Act. As a result of this search, the assessment was reopened, and a fresh assessment was completed under Section 143(3) read with Section 153A of the Act on 28th March 2016. The AO determined the total income at Rs. 26,21,679, making an addition of Rs. 23,13,420 on account of unexplained differences in house property construction and repairs.

The AO also initiated penalty proceedings under Section 271(1)(c), citing that the appellant had furnished inaccurate particulars of income. Consequently, a penalty of Rs. 7,14,846 was imposed. The appellant contested this penalty before the CIT(A), but the penalty was sustained. Aggrieved by this decision, the appellant approached the Income Tax Appellate Tribunal (ITAT) for relief.

Proceedings in the Tribunal

The appeal was heard by the Delhi “SMC” Bench of the Income Tax Appellate Tribunal via video conferencing. The bench was presided over by Shri Kul Bharat, Judicial Member. The hearing took place on 7th December 2021, with the final order pronounced on the same day.

During the hearing, the appellant was represented by Shri Ravinder Singh Ahuja, Chartered Accountant, while the Department’s Representative (DR), Shri Om Prakash, argued on behalf of the Revenue. The primary contention of the appellant was that the addition on which the penalty was based had already been deleted by the Tribunal in a quantum appeal. The appellant’s counsel argued that since the addition had been deleted, the penalty under Section 271(1)(c) could not survive.

Dispute Over Penalty Under Section 271(1)(c)

The core issue in this case revolved around the imposition of a penalty under Section 271(1)(c) of the Income Tax Act, which deals with penalties for concealment of income or furnishing inaccurate particulars of income. The AO had imposed this penalty based on the addition made during the reassessment proceedings, which was related to unexplained differences in house property construction costs.

The appellant argued that the penalty was unjustified, as the addition itself was not supported by any incriminating material found during the search. The penalty was primarily based on the opinion of the Valuation Officer, which the appellant contended was not sufficient grounds for imposing such a penalty. Moreover, the appellant highlighted that the Tribunal, in a separate quantum appeal (ITA No. 2479/Del/2017), had already deleted the addition, making the penalty baseless.

Tribunal’s Analysis and Decision

The Tribunal reviewed the submissions made by both parties and the relevant facts of the case. The Tribunal noted that the penalty under Section 271(1)(c) was imposed based on an addition that had been made during the assessment proceedings. However, the Tribunal also recognized that the addition in question had already been deleted in the appellant’s quantum appeal. Given that the foundation for the penalty no longer existed, the Tribunal held that the penalty under Section 271(1)(c) could not be sustained.

The Tribunal emphasized that penalties under Section 271(1)(c) are meant to address cases of deliberate concealment or misrepresentation of income. In this case, however, the addition was based on the AO’s reliance on the Valuation Officer’s opinion, which was not corroborated by any incriminating evidence. As a result, the Tribunal found that there was no basis for the penalty and directed the AO to delete the penalty of Rs. 7,14,846.

Thus, the Tribunal allowed the appellant’s appeal, and the penalty was deleted. The decision was announced at the conclusion of the virtual hearing on 7th December 2021.

Conclusion

The case of Babli Kukreja vs. ACIT, Central Circle-15, New Delhi, highlights the importance of ensuring that penalties under Section 271(1)(c) are imposed only in cases where there is clear evidence of concealment or misrepresentation of income. The Tribunal’s decision to delete the penalty reinforces the principle that penalties should not be levied on the basis of unsupported or uncorroborated additions.

This case serves as a reminder to taxpayers and tax authorities alike that penalties must be grounded in solid evidence and that taxpayers have the right to contest penalties that are unjustified. For tax professionals, this case underscores the importance of thoroughly reviewing the basis for any penalties imposed and ensuring that all avenues for appeal are considered when the penalty is based on questionable grounds.

The final order, pronounced on 7th December 2021 by Shri Kul Bharat, Judicial Member, reflects the Tribunal’s commitment to upholding the principles of justice and fairness in tax proceedings.

Order Pronounced By: Shri Kul Bharat, Judicial Member

Final Order: Penalty Deleted, Appeal Allowed

Babli Kukreja vs. ACIT, Central Circle-15, New Delhi: Case Filed for 2008-09 Assessment Year – Dispute Over Penalty Under Section 271(1)(c)