2016 (8) TMI 1486 - AT - Income Tax

Penalty u/s 271(1)(c) - professional fee paid to Shri S.K. Gupta - HELD THAT - As decided by Tribunal that the Assessing Officer was not justified in making the disallowance of profession fee paid to Shri S.K. Gupta and the Ld. Commissioner of Income Tax (Appeal) in confirming the same. In view of this factual matrix, since the addition on the basis of which penalty was levied is no more surviving, therefore, penalty has to be deleted. Our view find support from the decision in K.C. Builders vs ACIT ( 2004 (1) TMI 7 - SUPREME COURT) and CIT vs S.P. Viz, ( 1988 (10) TMI 24 - PATNA HIGH COURT) . Even otherwise, when the quantum addition is deleted, there remains no basis at all for levying the penalty for concealment or furnishing inaccurate particulars. The penalty cannot stand on its legs, thus, the appeal of the Revenue is dismissed. The stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed. Appeal of the Revenue is dismissed.

Summary

Issues:
- Penalty under section 271(1)(c) of the Income Tax Act, 1961 for professional fee paid to Shri S.K. Gupta.

Analysis:
The Appellate Tribunal ITAT Mumbai dealt with the issue of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for professional fee paid to Shri S.K. Gupta. The Tribunal noted that the Assessing Officer disallowed the professional charges based on statements made by Shri S.K. Gupta during search operations, but later retracted those statements. The Tribunal found that the tax authorities rejected the evidence provided by the assessee without proper consideration, which was deemed unjustified. The Tribunal also highlighted that the Assessing Officer did not conduct an independent inquiry with Shri S.K. Gupta despite his retraction of earlier statements. Furthermore, the Tribunal observed that the AO solely relied on investigation reports without addressing the retraction or conducting a thorough examination. The Tribunal concluded that the disallowance of professional fee paid to Shri S.K. Gupta was not justified and directed the assessing officer to delete the addition.

In a related case, the Tribunal referenced a similar matter involving M/s Link Engineers Pvt Ltd, where professional charges to Shri S.K. Gupta were also disputed. The Tribunal found that the Assessing Officer's reliance on original statements without considering retractions was improper. The Tribunal noted that the CIT(A) in the Link Engineers case had partially confirmed the addition, but ultimately concluded that the professional charges were genuine. Applying the same reasoning, the Tribunal decided that the disallowance of professional fee paid to Shri S.K. Gupta group of companies in the present case was unwarranted. Consequently, the Tribunal set aside the CIT(A)'s order and directed the deletion of the addition.

Regarding the penalty imposition, the Tribunal held that since the addition forming the basis of the penalty was deleted, the penalty could not be sustained. Citing legal precedents, the Tribunal emphasized that when the quantum addition is eliminated, there is no basis for levying a penalty for concealment or furnishing inaccurate particulars. Therefore, the Tribunal dismissed the Revenue's appeal and affirmed the decision of the Commissioner of Income Tax (Appeal) to delete the penalty. The Tribunal pronounced the order in open court, dismissing the appeal of the Revenue.