ITAT Ahmedabad deletes section 271AAC penalty and section 272A(1)(d) penalty after deleting underlying addition and finding reasonable cause

5-Second Takeaway

The Tribunal held that the section 271AAC(1) penalty could not survive once the underlying section 69A read with section 115BBE addition was deleted. It also held that the section 272A(1)(d) penalty was not automatic and was barred by section 273B because the assessee showed reasonable cause for non-compliance with electronic notices.

The Income Tax Appellate Tribunal, Ahmedabad C Bench, considered two penalty levies arising from the assessee’s assessment. On the first issue, the Tribunal held that section 271AAC(1) is a penalty provision directly connected with the section 115BBE quantum addition, so the penalty could not stand once the related addition was deleted.

The Tribunal noted the finding that the cash deposits and withdrawals in question pertained to various individuals and not to the assessee. Since the underlying addition of Rs. 3,48,46,961 under section 69A read with section 115BBE was deleted, the consequential penalty of Rs. 27,18,063 under section 271AAC(1) was also deleted.

On the second issue, the Tribunal held that penalty under section 272A(1)(d) is subject to section 273B and is not automatic merely because there was non-compliance with statutory notices. The assessee was engaged in field-level rural banking activities and had failed to respond to notices issued electronically, but the Tribunal found that the default stemmed from lack of tax or e-portal awareness or inadequate professional assistance, not from any deliberate intent to obstruct the proceedings.

Finding reasonable cause within the meaning of section 273B, the Tribunal deleted the penalty of Rs. 20,000 under section 272A(1)(d). Both appeals filed by the assessee were allowed.