2019 (8) TMI 353 - AT - Income Tax

Penalty u/s 271(1)(c) - combined order of penalty for additions made vide order u/s 143(3) r.w.s. u/s 153A and u/s 143(3) r.w.s. 147 - HELD THAT - AO passed the common penalty order imposing penalty u/s 271(1)(c) in respect of the additions made vide order 143(3) r.w.s. u/s 153A and the order passed u/s 143(3) r.w.s. 147 on two different dates. Both the orders are independent of each other. AO required to initiate two penalty proceedings by issue of separate notices u/s 271(1)(c) of the Act and to pass separate penalty orders independently. Therefore, there was a defect in the penalty order passed by the AO u/s 271(1)(c) and the same is unsustainable. DR fairly conceded that in the instant case, the additions representing the penalty were deleted by the CIT(A) and the department did not prefer appeal against the CIT(A) order, hence there is no enforceable demand in respect of the penalties. As submitted by the DR since the additions representing penalty were deleted, the penalty also gets squared off and accordingly gets cancelled and there would be no grievance to the assessee. Accordingly, we set aside the order of the CIT(A) and delete the penalty levied by the AO. - Appeal of the assessee is allowed.

Summary

Issues:
Assessment u/s 143(3) r.w.s.153A for A.Y. 2003-04, addition of share application money and advance for flats, penalty u/s 271(1)(c), reopening of assessment u/s 147, penalty proceedings post reassessment, confirmation of penalty by Ld.CIT(A), appeal by revenue before Tribunal, deletion of quantum additions by ITAT, challenge to penalty imposition, common penalty order for separate assessment orders, defect in penalty order, enforceable demand for penalties, cancellation of penalty.

Analysis:
The appeal was filed against the CIT(A)'s order for A.Y. 2003-04, where the AO added amounts related to share application money and flat advances, initiating penalty proceedings under section 271(1)(c). Subsequently, a reassessment under section 147 added further income, leading to penalty imposition. The CIT(A) confirmed the penalty only for the reassessment addition. The revenue appealed to the Tribunal, arguing for penalty confirmation, but the AR contended that quantum additions were deleted by ITAT, rendering the penalty baseless due to lack of appeal against the deletion. The Tribunal noted the separate assessment orders and the common penalty order, ruling the penalty unsustainable due to procedural defects.

During the appeal, the DR acknowledged the deletion of additions by CIT(A), leading to no enforceable demand for penalties. As the penalty base was eliminated, the penalty was canceled, favoring the assessee. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the penalty levied by the AO, allowing the assessee's appeal. The decision was pronounced in August 2019, resolving the penalty dispute in favor of the assessee.