2019 (6) TMI 82 - AT - Income Tax

Penalty u/s 271(1)(c) - deletion of quantum addition by the Hon ble ITAT 2018 (4) TMI 1710 - ITAT JAIPUR - HELD THAT - The revenue has not disputed the fact that the addition made by the AO has been deleted by this Tribunal in the quantum appeal as referred by the CIT (A) in the impugned order. However, the revenue has challenged the order of the CIT (A) cancelling the penalty levied under section 271(1)(c) only on the ground that the order of this Tribunal in quantum appeal has not been accepted by the revenue. The revenue has not produced any record or even claimed that the said order of the Tribunal in quantum appeal has been reversed by the Hon ble High Court. Accordingly, in the facts and circumstances of the case, when the addition itself is not in existence then the penalty levied under section 271(1)(c) has no legs to stand. - Decided in favour of assessee

Summary

Issues Involved:
Appeal against penalty order under section 271(1)(c) of the IT Act for the assessment year 2012-13.

Analysis:
The appeal by the revenue challenged the order of the ld. CIT (A)-1, Jaipur dated 20th August, 2018 regarding the deletion of penalty under section 271(1)(c) of the IT Act amounting to ?26,00,670. The key issue was whether the ld. CIT (A) was justified in deleting the penalty when the quantum addition by the ITAT in ITA No. 284/JP/2017 had not been accepted on merits. The penalty was initially levied by the AO against the addition on account of the determination of ALV of the property under section 23(1)(a) of the Act. However, the ld. CIT (A) deleted the penalty considering that the addition itself was deleted by the Tribunal in the quantum appeal.

The Tribunal noted that the penalty was imposed based on the addition that was later deleted by the Tribunal in the quantum appeal. Citing the case of K.C. Builders vs. ACIT, it was emphasized that if the additions forming the basis of the penalty are deleted, there is no basis for the penalty. The Tribunal found that no penalty could be justified based on adhoc disallowance without substantial evidence. The revenue did not challenge the deletion of the addition by the Tribunal but contested the cancellation of the penalty solely on the grounds of the Tribunal's order not being accepted by the revenue.

The Tribunal emphasized that since the addition itself was deleted by the Tribunal and there was no evidence of reversal by the High Court, the penalty under section 271(1)(c) had no basis to stand. Consequently, the appeal of the revenue was dismissed, upholding the deletion of the penalty under section 271(1)(c) of the IT Act for the assessment year 2012-13.