2019 (5) TMI 1056 - AT - Income Tax

Penalty levied u/s 271(1)(c) - additions made while framing the assessment u/s 153A was deleted - HELD THAT - The facts on record show that the assessment was completed on an income of ₹ 2,03,35,310/-. When the assessment was assailed before the CIT(A), the assessee could get only a relief of ₹ 31,320/- and the matter travelled upto the Tribunal. The Tribunal in D ART FURNITURE SYSTEMS P. LTD. VERSUS DCIT, CENTRAL CIRCLE 8, NEW DELHI 2019 (2) TMI 334 - ITAT DELHI set aside the findings of the CIT(A) and deleted the addition by allowing the appeal of the assessee. None of the provisions confine the enquiry of the AO to evaluating incriminating materials. When the foundation assessment is removed, the super structure penalty must fall. - Decided in favour of assessee.

Summary

Issues:
Challenge against penalty levied under section 271(1)(c) of the Income-tax Act, 1961 on additions made during assessment under section 153A for the assessment year 2008-09.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax [Appeals] regarding the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. The main contention raised by the assessee was that the CIT(A) erred in upholding the penalty on additions made during the assessment under section 153A of the Act. The assessment was initially completed at an income of ?2,03,35,310, and upon appeal, the assessee received a relief of only ?31,320. Subsequently, the matter was taken to the Tribunal, which in its order dated 06.02.2019 in ITA No. 5750/DEL/2014, set aside the findings of the CIT(A) and deleted the addition, thereby allowing the appeal of the assessee.

The Tribunal referred to a decision by the Hon'ble Delhi High Court in the case of Pro.CIT vs. Ram Avtar Verma, emphasizing that the non-obstante clause in Section 153A, along with Section 158BD, removes the restriction on search assessments being limited to "undisclosed income." The Tribunal noted that the AO had made additions based on the audited balance sheet filed during the assessment proceedings. Following the principles laid down by the Delhi High Court and the decision in Kabul Chawla v. CIT, the Tribunal concluded that the ITAT decision did not warrant interference, and accordingly, ground no.1 raised by the assessee was allowed.

The Tribunal highlighted the principle that when the foundation (assessment) is removed, the superstructure (penalty) must fall. Consequently, the appeal filed by the assessee in ITA No. 1354/DEL/2018 was allowed, and the penalty levied under section 271(1)(c) was set aside. The order was pronounced in open court on 16.05.2019.