2019 (5) TMI 1645 - HC - Income Tax

Penalty u/s 271(1)(c) - quantum additions have been deleted - HELD THAT - Once the quantum additions have been deleted by the Tribunal and the same having been upheld by this Court no case for penalty is made out. No illegality or perversity could be pointed out by the learned counsel for the revenue in the findings recorded by the CIT(A) and affirmed by the Tribunal which may warrant interference by this Court. No question of law arises in this appeal.

Summary

Issues:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act for the assessment year 2006-07.
2. Applicability of penalty in relation to additions made by the Assessing Officer.

Analysis:

Issue 1: Deletion of penalty under Section 271(1)(c) of the Income Tax Act for the assessment year 2006-07

The appeal under consideration pertains to ITA-362-2018 filed by the revenue against the order of the Income Tax Appellate Tribunal, Chandigarh Bench 'A', which had deleted a penalty amount of &8377; 31,76,819/- imposed under Section 271(1)(c) of the Act for the assessment year 2006-07. The Tribunal had originally upheld the addition made by the Assessing Officer regarding undisclosed income related to the purchase of land. However, upon further appeal, the Tribunal reversed its decision and held that the income was taxable in the hands of a company instead of the assessee, leading to the deletion of the penalty. The Commissioner of Income Tax (Appeals) also quashed the penalty on similar grounds. The Tribunal's decision was subsequently upheld by the High Court in previous cases, establishing a precedent against imposing penalties when additions have been deleted.

Issue 2: Applicability of penalty in relation to additions made by the Assessing Officer

The High Court, in its analysis, noted that the CIT(A) had deleted penalties amounting to &8377; 31,76,819/- and &8377; 1,45,18,829/- for different assessment years based on the deletion of additions made by the Assessing Officer. The Court reiterated that when additions have been deleted by the Tribunal, as in this case, the basis for imposing penalties ceases to exist. The Court found no legal grounds to interfere with the findings of the CIT(A) and the Tribunal, emphasizing that no question of law arose in the appeal. Consequently, the Court dismissed the revenue's appeals, citing lack of merit.

In conclusion, the High Court upheld the decisions of the lower authorities to delete the penalty under Section 271(1)(c) of the Income Tax Act for the assessment year 2006-07, emphasizing the importance of the Tribunal's deletion of additions as a basis for not imposing penalties. The judgment serves as a reminder that penalties must be justified by valid additions, and when such additions are reversed, penalties cannot be sustained.