2015 (12) TMI 1325 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - There is no dispute that quantum addition has been deleted by the Tribunal, therefore, in our humble opinion, the ld. Commissioner of Income tax (Appeals) is justified in deleting the penalty. Our view further finds support from the decision and the ratio laid down in CIT vs S.P Viz Construction company (1988 (10) TMI 24 - PATNA High Court ) and K.C. Builders vs ACIT (2004 (1) TMI 7 - SUPREME Court ). We are of the view that where the penalty for concealment or furnishing inaccurate particulars was levied and after deleting the quantum addition, there remains no basis at all for levying the penalty. Ordinarily, penalty cannot stand in itself if the addition made in the assessment itself is set aside or cancelled by the superior authority/Court. The penalty cannot stand by itself because false result may be produced by the falsity of one or more of the constituent items in the return. The word inaccurate particulars would cover falsity in the final figure and also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect whether in the constituent or subordinate items of income or the end result. Concealment or furnishing inaccurate particulars implies some deliberate act on the part of the assessee in withholding the true facts from the authorities. Since, the basis of levying penalty remains no more in existence, after deletion of quantum addition, therefore, from this angle, the stand of the ld. Commissioner of Income tax (Appeals) is justified. - Decided against revenue

Summary

Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of quantum addition deleted by the Tribunal.
3. Justification of penalty imposition when the quantum addition was deleted.

Issue-wise Detailed Analysis:

1. Deletion of Penalty Imposed under Section 271(1)(c) of the Income Tax Act, 1961:
The Revenue contested the order dated 02/12/2013 by the First Appellate Authority, Mumbai, which deleted the penalty imposed under Section 271(1)(c). The penalty was initially imposed based on a quantum addition which was later deleted. The Tribunal, after considering the rival submissions and the material on record, found merit in the assessee's argument. The Tribunal noted that since the quantum addition was deleted, the penalty could not survive. This view was supported by the Tribunal's decision in the case of Smt. Neela P. Doshi, where the penalty was deleted following the deletion of the quantum addition.

2. Validity of Quantum Addition Deleted by the Tribunal:
The Tribunal had earlier deleted the quantum addition in the assessee's case, which formed the basis for the penalty. The Tribunal referenced its decision in ITA No.3513/Mum/2012, where the quantum addition was challenged. The case involved unexplained investments in jewelry found during a search operation. The assessee provided substantial evidence, including valuation reports and explanations for the jewelry's source, which the Tribunal found satisfactory. The Tribunal concluded that the jewelry found during the search was duly explained and deleted the quantum addition.

3. Justification of Penalty Imposition when the Quantum Addition was Deleted:
The Tribunal emphasized that penalty under Section 271(1)(c) cannot stand if the quantum addition is deleted. This principle was reiterated by referencing various judicial pronouncements, including decisions from the Patna High Court in CIT vs S.P Viz Construction Company and the Supreme Court in K.C. Builders vs ACIT. The Tribunal noted that penalty for concealment or furnishing inaccurate particulars implies a deliberate act by the assessee, which was not the case here as the quantum addition was deleted. Therefore, the penalty had no basis and was rightly deleted by the First Appellate Authority.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming that the deletion of the quantum addition invalidated the basis for the penalty. The Tribunal's decision was pronounced in the open court on 18/11/2015.