Case Law Details
Tanya Automobiles Pvt. Ltd. Vs ACIT (ITAT Delhi)
It was pointed out by the Ld. Counsel for the assessee that the quantum appeal arising out of assessment order has been decided vide ITA No. 1842/Del/2017 and the addition has been deleted. The fact could not be controverted by the Revenue.
The Bench is of firm view that the foundation of issuing show cause notice for penalty u/s 271(1)(c) of the Act, being crumbled by a verdict of this Tribunal, by deletion of additions, the penalty order alone cannot stand by its own against the assessee.
FULL TEXT OF THE ORDER OF ITAT DELHI
The assessee has filed this appeal against the order dated 29.03.2019 passed by the Commissioner of Income Tax (Appeals)-27, New Delhi confirming the penalty levied by the Assessing officer u/s 271(1)(c) of the Income Tax Act, 1961.
2. The facts in brief are the case of assessee was selected for scrutiny and order u/s 143(3) was passed after making an addition under the heads of “unexplained credits” u/s 68 of the Act and Ld. AO initiated penalty proceedings. Subsequently, the additions were sustained by Ld. CIT(A). Thereafter the impugned order of imposing penalty was passed.
3. The assessee had challenged the same but was sustained. Now assessee has raised following grounds of appeal :-
“1. That the Ld. CIT(A) erred on facts and in law in rejecting the adjournment applications and passing an ex-parte appellate order thereby violating the principles of natural justice.
2. That the penalty levied u/s 271(1)(c) of I.T.Act by the AO for furnishing inaccurate particulars of income is illegal as the Appellant had not furnished any inaccurate particulars of its income.
3. That the Ld. CIT(A) erred on facts and in law in confirming the penalty of Rs. 10,81,500/- u/s 271(1)(c) of I.T.Act.
4. That the Appellant reserves its right to add, amend/modify the grounds of appeal.”
4. Heard. It was pointed out by the Ld. Counsel for the assessee that the quantum appeal arising out of assessment order has been decided vide ITA No. 1842/Del/2017 and the addition has been deleted. The fact could not be controverted by the Revenue.
5. The Bench is of firm view that the foundation of issuing show cause notice for penalty u/s 271(1)(c) of the Act, being crumbled by a verdict of this Tribunal, by deletion of additions, the penalty order alone cannot stand by its own against the assessee. Reliance in this regard can be placed on the judgement of Hon’ble Delhi High Court in the case of Principal CIT vs. Fortune Technocomps P.Ltd. vide ITA 313/2016 dated 13th May, 2016 where it has held that once the assessment order of the AO in the quantum proceedings was altered by the Ld.CIT(A), in a significant way, the very basis of initiation of penalty proceedings was nonexistent. The Hon’ble Allahabad High Court in the cases of Shadiram Balmukand [1972] 84 ITR 183 and Dwarka Prasad Subhas Chandra [1974] 94 ITR 154 and the Hon’ble Gujarat High Court in the case of Lakkdhir Lalji [1972] 85. ITR 77 have also held that when the original basis of initiation of the penalty proceeding is altered or modified by the appellate authority, the authority initiating the penalty proceedings has no jurisdiction thereafter to proceed on the basis of the findings of the appellate authority. The Hon’ble Supreme Court in the case of K.C. Builders vs. ACIT 135 Taxman 461 (SC), has made it crystal clear that where the additions made in the Assessment Order, on the basis of which penalty for concealment was levied, are deleted, by ITAT or otherwise, the penalty cannot stand by itself and is liable to be cancelled.
6. Consequently, the appeal before the Bench succeed and the same is allowed. The impugned orders of the Ld. AO of levying penalty and of Ld. First Appellate Authority, confirming the penalty, stand set aside.
Order pronounced in open court on this 19th day of May, 2022.
