2016 (7) TMI 177 - AT - Income Tax

Penalty u/s 271(1)( c) - addition u/s 69C of the Act in respect of unexplained expenditure - Held that - The quantum addition has been deleted by the Tribunal and since the ld.CIT(A) has correctly deleted the penalty by a reasoned order on the ground that quantum having been deleted by the Tribunal. We also do inclined to interfere in the reasoned order of the ld.CIT(A). - Decided against revenue

Summary

Issues:
Challenge to deletion of penalty levied by AO for concealment of income.

Analysis:
The appeal was filed by the revenue against the order of the ld.CIT(A) challenging the deletion of penalty imposed by the AO for assessment year 2008-09. The assessee did not appear despite notice, seeking adjournment twice, which was rejected, leading to an ex-parte decision. The AO had made an addition under section 69C for unexplained expenditure, initiating penalty proceedings under section 271(1)(c) of the Act. The ld.CIT(A) deleted the penalty after the quantum addition was deleted by the Mumbai Bench of the Tribunal. The revenue appealed, arguing that the matter was subjudice before the High Court, and hence premature to confirm the deletion of penalty.

During the appellate proceedings, the ld.CIT(A) observed that penalty under section 271(1)(c) was imposed by the AO for concealment of income, but deleted the penalty after considering the Supreme Court's decision that mens rea is not essential for such penalty. The ld.CIT(A) noted that the Tribunal had quashed the assessments and deleted the additions on merits, which formed the basis for the penalty. Consequently, as the quantum addition was deleted by the Tribunal, the foundation for imposing the penalty ceased to exist, leading to the deletion of the penalty by the ld.CIT(A). The Tribunal confirmed the decision of the ld.CIT(A) and dismissed the revenue's appeal.

In conclusion, the Tribunal upheld the deletion of the penalty by the ld.CIT(A) as the quantum addition forming the basis for the penalty was deleted by the Tribunal. The Tribunal found no reason to interfere with the reasoned order of the ld.CIT(A) and hence confirmed the deletion of the penalty, ultimately dismissing the revenue's appeal.