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2019 (6) TMI 788 - AT - Income TaxPenalty levied u/s 271(1)(c) - concealment of income with regard to the bogus share application money received by the assessee u/s 68 - HELD THAT - Undisputedly, coordinate Bench of the Tribunal 2016 (11) TMI 589 - ITAT DELHI deleted the addition made u/s 68 of the Act. In these circumstances, the penalty levied by the AO and confirmed by ld. CIT (A) is not sustainable in view of the law laid down in K.C. Builders Anr vs. ACIT 2004 (1) TMI 7 - SUPREME COURT because when the addition made in the assessment order on the basis of which penalty for concealment is levied have been deleted there remains no basis at all for levying the penalty - Decided in favour of assessee.
Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income based on addition of undisclosed income under section 68 - Jurisdiction of Ld. CIT(A) in confirming the penalty - Sustainability of penalty in light of deletion of addition by Tribunal. Analysis: Issue 1: Jurisdiction of Ld. CIT(A) in confirming the penalty The appellant, M/s. Quality Enabled Remote Solutions (P) Ltd., appealed against the penalty levied under section 271(1)(c) of the Income-tax Act for the Assessment Year 2005-06. The grounds of appeal included challenging the jurisdiction of the Ld. CIT(A) in confirming the penalty without assuming proper jurisdiction or considering the facts of the case. The appellant argued that the penalty was imposed without legal basis and against the circumstances of the case. Issue 2: Sustainability of penalty based on addition of undisclosed income The penalty proceedings were initiated based on an addition of undisclosed income of ?20,00,000 under section 68 of the Act related to share application money through M/s. Geefcee Finance Ltd. The Assessing Officer (AO) imposed a penalty of ?7,31,849 @ 100% of the tax sought to be evaded under section 271(1)(c). The Ld. CIT(A) confirmed the penalty by dismissing the appeal. The appellant contended that the addition under section 68 had been deleted by the Tribunal in a previous case, making the penalty unsustainable as per the law laid down by the Hon'ble Apex Court. Issue 3: Effect of deletion of addition on penalty sustainability The Tribunal noted that the coordinate Bench had previously deleted the addition made under section 68 in the appellant's case. Citing the legal precedent from the case of K.C. Builders & Anr vs. ACIT, the Tribunal emphasized that when the basis for the penalty, i.e., the addition of income, has been deleted, there is no justification for levying the penalty for concealment. Therefore, the penalty imposed by the AO and confirmed by the Ld. CIT(A) was deemed unsustainable and ordered to be deleted. Consequently, the appeal filed by the assessee was allowed. In conclusion, the Tribunal held that the penalty under section 271(1)(c) was not sustainable due to the deletion of the addition of undisclosed income by the Tribunal in a previous case. The legal precedent established that when the basis for the penalty is eliminated, the penalty for concealment cannot be upheld. As a result, the penalty imposed on the appellant was canceled, and the appeal was allowed.
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