2017 (6) TMI 1 - AT - Income Tax

Penalty imposed u/s 271(1)(c) - Held that - On quantum addition, quashed the notices issued u/s 153/153C of the Act were held to be invalid, resultantly the assessment orders passed u/s 143(3) r.w.s 153C dated 29/12/2008 were cancelled. Identically, for Assessment Year 2001-02 and 2003-04 in the case of assessee itself, the Tribunal deleted the penalty. In view of this factual matrix, we are of the view that penalty imposed u/s 271(1)(c) will not survive. Our view find support from the decision in K.C. Builders vs ACIT (2004 (1) TMI 7 - SUPREME Court) and the ratio laid down in 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 when addition on the basis of which the penalty was imposed remains no more in existence, thus, the appeal of the assessee is allowed and the ld. Assessing Officer is directed to delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Challenge to imposition/confirmation of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2004-05, 2005-06, and 2006-07.

Analysis:

1. Quantum Addition and Penalty Imposition: The appellant contested the penalty imposed under section 271(1)(c) based on quantum additions, which were later decided in favor of the assessee in a separate order dated 14/01/2016. The Tribunal noted that the quantum additions were quashed in the said order, rendering the penalty invalid. The Tribunal cited precedents such as K.C. Builders vs ACIT and CIT vs S.P. Viz to support the decision that when the basis for imposing a penalty is deleted, the penalty itself cannot be sustained. Consequently, the penalty u/s 271(1)(c) was directed to be deleted.

2. Validity of Assessment Orders: The Tribunal examined the assessment orders passed u/s 143(3) r.w.s 153C and found them unsustainable due to the absence of incriminating material seized during the search. The Tribunal emphasized that additions made without such material are not legally tenable. Relying on various decisions and legal propositions, the Tribunal concluded that in the absence of incriminating material, additions to the assessed income are unsustainable. Therefore, the additions made in the instant case were deemed not sustainable, leading to their deletion.

3. Judicial Precedents and Legal Position: The Tribunal referred to specific judicial decisions, including those of the Tribunal and the Bombay High Court, to establish the legal position that additions or disallowances not based on material found during a search are invalid when no assessment has abated. The Tribunal's analysis of these precedents supported the decision to delete the additions made in the present case.

4. Outcome and Conclusion: Ultimately, the Tribunal allowed the appeals of the assessee, directing the Assessing Officer to delete the penalty imposed under section 271(1)(c). The decision was based on the quashing of quantum additions in a separate order and the legal principle that a penalty cannot be sustained when the basis for its imposition no longer exists. The order was pronounced in the presence of representatives from both sides on 11/04/2017.

This detailed analysis of the judgment highlights the key issues, legal arguments, precedents cited, and the ultimate decision reached by the Tribunal regarding the penalty imposed under section 271(1)(c) of the Income Tax Act for the relevant assessment years.