ITAT Deletes Rs 1.24 Lakh Penalty After Finding Rs 4 Lakh Section 68 Unexplained Cash Credits Addition No Longer Survives:

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has deleted a penalty of Rs 1.23 lakh imposed on Jaykrishna Developers Pvt Ltd under Section 271(1)(c) of the Income-tax Act, 1961. The Tribunal held that the penalty could not survive after the underlying addition of Rs 4 lakh under Section 68 had already been deleted in the company’s quantum appeal.

The assessee, Jay Krishna Developers Private Limited, had declared NIL income in its income tax return (ITR) for the Assessment Year 2012-13. During the assessment of the return, the Assessing Officer (AO) made an addition amounting to Rs 4 lakh under Section 68 of the Income Tax Act, treating the amount credited to the company’s bank account as an unexplained cash credit. The Assessing Officer subsequently imposed a penalty of Rs 1.24 lakh under Section 271(1)(c), equivalent to 100% of the tax allegedly sought to be evaded. The assessment was completed under Section 143(3) of the Act.

Before the ITAT, the assessee submitted that the Rs 4 lakh credit was not an unsecured loan or unexplained cash credit. It was actually a payment received towards the sale of an immovable property unit under a registered agreement for sale with purchaser Radhey Sham Sharma. The assessee also relied on the ITAT’s earlier order in ITA No. 8686/Mum/2025, through which the Rs 4 lakh addition had been deleted.

The Revenue accepted that the quantum addition had already been deleted. The Mumbai Bench observed that the Rs 4 lakh addition was the sole basis for the penalty. Since the addition no longer survived, the Tribunal held that the penalty under Section 271(1)(c) could not be sustained. Accordingly, the ITAT allowed the assessee’s appeal and directed the Assessing Officer to delete the penalty of Rs 1.24 lakh.