In Mohd. Javed v. Income Tax Officer, Ward-48(1), Delhi (ITAT Delhi, order dated 09 January 2026), the Delhi Bench of the Income Tax Appellate Tribunal examined the validity of penalties imposed under Sections 271A and 272A(1)(d) of the Income Tax Act, 1961 for Assessment Year 2017-18, arising from alleged unexplained cash deposits.

The penalties were levied on the premise that the assessee had failed to satisfactorily explain cash deposits amounting to ₹43,57,600 in his bank account. However, the Tribunal noted that in the assessee’s quantum proceedings for the same assessment year, the coordinate Bench had already accepted that the cash deposits were sourced from business turnover, with only a lump-sum addition of ₹4,50,000 sustained. Further, in earlier penalty proceedings under Section 271B, the Tribunal had quashed the penalty after holding that the assessee acted as a commission agent, and the deposits were consistent with business operations.

The Tribunal observed that the subsequent findings in favour of the assessee adequately addressed the source of cash deposits and rendered the explanation satisfactory for the purposes of Section 69A. In light of these binding findings, the very foundation for levy of penalties under Sections 271A and 272A(1)(d) ceased to exist. It was reiterated that penalty proceedings cannot be sustained independently when the underlying additions have either been deleted or substantially explained.

Accordingly, the Tribunal allowed both appeals filed by the assessee and quashed the impugned penalty orders, holding that the penalties were unsustainable in law.

Source Link- https://itat.gov.in/public/files/upload/1767953980-b5qskz-1-TO.pdf

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