2018 (6) TMI 1456 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - It is evident that the addition in question in respect of which penalty was levied, has already been deleted by the Tribunal and the Hon ble jurisdictional High Court - In such circumstances, when the addition itself has been deleted, the penalty levied on the same cannot survive - Decided in favour of assessee

Summary

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Legality of assessment based on seized documents from a third party.
3. Merits of the addition made by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The primary issue in this appeal was whether the penalty of ?48,18,083/- imposed under Section 271(1)(c) of the Income-tax Act, 1961, was justified. The penalty was initially levied by the Assessing Officer on the grounds that the assessee furnished inaccurate particulars of income concerning an addition of ?1,40,75,000/-. The CIT(A) upheld this penalty. However, the Tribunal noted that the quantum addition, which formed the basis for the penalty, had been deleted by the Tribunal in ITA No. 2463/Del/2013 and affirmed by the Hon’ble Delhi High Court in ITA No. 804/2016. Consequently, the Tribunal held that since the addition itself was deleted, the penalty could not survive and directed the Assessing Officer to cancel the penalty.

2. Legality of Assessment Based on Seized Documents from a Third Party:
The Tribunal examined the legality of the assessment, which was based on documents seized from a third party during a search operation. The documents in question were seized from the premises of Shri B.K. Dhingra and not from the assessee. The Tribunal highlighted that the Assessing Officer did not record any satisfaction that the seized documents had a bearing on the assessee’s income, as required under Section 153C of the Income-tax Act. The Tribunal upheld the assessment under Section 143(3) but rejected the additional ground raised by the appellant concerning the applicability of Section 153C.

3. Merits of the Addition Made by the Assessing Officer:
On the merits, the Tribunal analyzed the seized documents, which included a chart and cheque book counterfoils. The Tribunal found several issues with the addition made by the Assessing Officer:
- The documents were not seized from the assessee’s premises.
- There was no evidence linking Shri B.K. Dhingra with the assessee.
- The cheques mentioned in the documents were not cleared in the assessee’s bank account.
- The assessee was not confronted with any statements from the person from whom the documents were seized.
- The assessee provided confirmations from parties mentioned in the documents, stating they had not booked any premises or made any payments.
- The Tribunal found no evidence to support the revenue’s allegation that the companies involved were bogus.

Based on these findings, the Tribunal concluded that the addition of ?1,40,75,000/- was not justified and reversed the CIT(A)’s decision confirming the addition.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the cancellation of the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961, as the underlying addition was deleted. The decision was pronounced in the open court on 27th June 2018.