2021 (4) TMI 1301 - AT - Income Tax

Penalty u/s 271(1)(c) - HELD THAT - In the present case the basis for levying the penalty U/s 271(1)(c) is not in existence as the assessment itself is set aside 2021 (5) TMI 22 - ITAT CHANDIGARH we therefore by following the ratio laid down by KC BUILDERS AND ANOTHER VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX 2004 (1) TMI 7 - SUPREME COURT delete the impugned penalty u/s 271(1)(c) of the Act levied by the A.O. and sustained by the ld. CIT(A). - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:

1. The appeal was filed by the Assessee against the penalty imposed by the Commissioner of Income Tax (Appeals) amounting to Rs. 17,00,000 under section 271(1)(c) of the Income Tax Act, 1961. The Assessee contended that the penalty was not exigible in the circumstances of the case and was levied for allegedly furnishing inaccurate particulars of income instead of concealment of income.

2. The Assessee's main grievance in the appeal was against the penalty imposed by the Assessing Officer (A.O.) under section 271(1)(c) of the Act, which was upheld by the Commissioner of Income Tax (Appeals). During the hearing, it was revealed that the assessment order on which the penalty was based had been set aside by the ITAT in a previous case of the Assessee for the assessment year 2010-11. The material available on record showed that the assessment order forming the basis for the penalty had been quashed, rendering the penalty unjustified.

3. The ITAT observed that since the assessment order, the basis for the penalty, had been set aside, there was no valid basis for imposing the penalty under section 271(1)(c) of the Act. Citing a precedent set by the Hon'ble Apex Court in the case of K.C. Builders and Anr. Vs ACIT, where it was held that if the additions made in the assessment order are deleted, there is no basis for levying a penalty for concealment, the ITAT decided to delete the penalty levied by the A.O. and upheld by the CIT(A).

4. Following the legal principle established by the Hon'ble Apex Court, the ITAT ruled in favor of the Assessee and allowed the appeal, thereby deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The decision was based on the fact that the assessment order, which formed the basis for the penalty, had been set aside, and as a result, the penalty could not be sustained.

This detailed analysis of the judgment highlights the key issues raised in the appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, and explains the rationale behind the ITAT's decision to delete the penalty based on the legal precedents and the absence of a valid basis for the penalty.