2019 (8) TMI 1411 - AT - Income Tax

Penalty u/s 271(1)(c) - quantum addition deleted - HELD THAT - As perused the orders of the lower authorities and the material available on record. We find that the Tribunal while disposing off the quantum appeal of the assessee for the year under consideration i.e. A.Y. 2010-11 had vacated the addition that was confirmed by the CIT(A). We are of the considered view that now when the quantum addition had been vacated by the Tribunal, therefore, the penalty imposed by the A.O under Sec.271(1)(c) in respect of the said addition cannot be sustained and is accordingly deleted.

Summary

Issues:
1. Penalty imposed under Sec. 271(1)(c) for inaccurate particulars.
2. Quantum additions/disallowances made by the Assessing Officer.
3. CIT(A)'s order on quantum appeal.
4. Tribunal's decision on quantum appeal.
5. Appeal against penalty before CIT(A).
6. Appeal against penalty before ITAT Mumbai.

Issue 1: Penalty imposed under Sec. 271(1)(c) for inaccurate particulars:
The assessee appealed against the penalty imposed under Sec. 271(1)(c) for inaccurate particulars related to additions made by the Assessing Officer. The CIT(A) upheld the penalty, leading to further appeal before ITAT Mumbai. The Tribunal noted that the quantum addition had been vacated by them in a previous order, rendering the penalty invalid. Citing Supreme Court decisions on inventory valuation, the Tribunal deleted the penalty as the basis for the addition was incorrect.

Issue 2: Quantum additions/disallowances made by the Assessing Officer:
The Assessing Officer made additions/disallowances totaling &8377; 8,45,04,190/-, including understatement of sale proceeds, profit under percentage completion method, and loan processing charges. These were contested by the assessee in the appeal.

Issue 3: CIT(A)'s order on quantum appeal:
The CIT(A) deleted the addition of &8377; 4,00,00,000/- for understatement of sale proceeds and the disallowance of loan processing charges. However, the addition of &8377; 2,39,00,000/- towards profit under percentage completion method was partially sustained by recalculating the profit based on an average sale price.

Issue 4: Tribunal's decision on quantum appeal:
The Tribunal vacated the addition of &8377; 85,18,702/-, which was confirmed by the CIT(A), based on incorrect valuation of unsold flats. Citing Supreme Court rulings, the Tribunal directed the Assessing Officer to accept the valuation done by the assessee, leading to the deletion of the addition.

Issue 5: Appeal against penalty before CIT(A):
The assessee challenged the penalty before the CIT(A), who upheld the penalty imposed by the Assessing Officer under Sec. 271(1)(c) despite the quantum addition being vacated by the Tribunal.

Issue 6: Appeal against penalty before ITAT Mumbai:
The assessee appealed against the penalty before ITAT Mumbai, arguing that since the quantum addition was deleted by the Tribunal, the penalty should also be annulled. The Tribunal agreed with this argument and deleted the penalty, allowing the appeal of the assessee.

This detailed analysis covers the various issues involved in the legal judgment delivered by ITAT Mumbai regarding the penalty imposed under Sec. 271(1)(c) and the quantum additions/disallowances made by the Assessing Officer, CIT(A)'s order, Tribunal's decision, and subsequent appeals.