2021 (11) TMI 1164 - HC - Income Tax

Penalty u/s 271(1)(c) - judgment of the Tribunal would show that the penalty was deleted on the ground that quantum additions were deleted by the Tribunal and upheld by the High Court - HELD THAT - In view of the position above, the question of penalty would not survive. As decided by Tribunal this issue is finally settled and decided in favour of the assessee by the Hon ble High Court in assessee s own case. Accordingly, in view of the fact that the addition itself was deleted by the Tribunal and then by the Hon ble Jurisdictional High Court, then the penalty levied in respect of such disallowance is not sustainable - penalty levied under Section 271 (1) (c) against the disallowance of prior period expenditure is deleted. No substantial of question of law arises.

Summary

Issues:
Deletion of penalty by the Income Tax Tribunal and justification of the same.

Analysis:
The High Court dealt with a group of appeals concerning the deletion of penalties by the Income Tax Tribunal. The primary issue was whether the Tribunal was justified in deleting the penalties imposed by the Assessing Officer. The Tribunal's judgment indicated that penalties were removed because quantum additions were also deleted by the Tribunal and upheld by the High Court. The Tribunal specifically mentioned that since the addition was deleted by both the Tribunal and the High Court, the penalty imposed under Section 271 (1) (c) was not sustainable. Consequently, the High Court found that no question of law arose, leading to the dismissal of all appeals. The Court emphasized that the issue was conclusively settled in favor of the assessee by the High Court, resulting in the deletion of the penalties. The decision was based on the fact that the addition itself was eliminated by both the Tribunal and the High Court, rendering the penalty unjustifiable. Therefore, the appeals of the assessee were allowed, while those of the revenue were dismissed, with no legal question remaining for consideration.

By thoroughly examining the Tribunal's judgment and the subsequent actions taken by the High Court, the High Court concluded that the penalties were rightly deleted. The High Court reiterated that since the Tribunal and the High Court had already ruled in favor of the assessee by eliminating the additions, the penalties imposed on the disallowance of prior period expenditure were not sustainable. The Court emphasized the principle that once the underlying addition was annulled, the penalty associated with it could not stand. This comprehensive analysis led to the dismissal of all appeals, as the issue had been definitively settled in favor of the assessee. The High Court's decision was based on the legal principle that penalties must be aligned with the underlying tax adjustments, and if those adjustments are removed, the penalties cannot be maintained. Thus, the High Court upheld the Tribunal's decision to delete the penalties, ensuring a fair and just outcome based on legal precedents and principles.