2021 (2) TMI 419 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus purchases - HELD THAT - In this case the quantum addition made by the ld. Assessing Officer on which the penalty has been levied has already been deleted by the Tribunal, which has now become final we are of the view that now the cause for the levy of the penalty does not continue. In view of these facts, we reverse the orders of the lower authorities and direct the ld. Assessing Officer to delete the penalty levied under Section 271(1)(c) of the Act. Accordingly, appeal of the assessee is allowed.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2008-09.

Analysis:
The appeal was filed against the order confirming the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The assessee challenged the penalty amounting to ?6,09,970/- imposed for additions made on account of bogus purchases. The grounds of appeal included contentions regarding the legality and factual basis of the penalty.

The facts revealed that the assessee's return of income was initially filed at ?1,56,005/-, but later, after a reassessment, an addition of ?19,74,026/- was made on account of bogus purchases, resulting in a total income of ?21,30,031/-. Subsequently, penalty proceedings were initiated for furnishing inaccurate particulars of income. The original addition, forming the basis of the penalty, was challenged and ultimately quashed by the SMC Bench based on a previous case ruling.

Despite the deletion of the quantum addition by the Tribunal, the Assessing Officer levied a penalty of ?6,09,970/-. The assessee contended that since the addition was deleted and finalized, the penalty could not be sustained. The arguments presented by both the ld. AR and ld. DR were considered, and it was noted that the cause for penalty imposition ceased to exist after the deletion of the quantum addition.

Upon careful consideration of the contentions and lower authorities' orders, it was concluded that since the quantum addition, the basis for the penalty, had been deleted and finalized, the penalty could not be upheld. Consequently, the orders of the lower authorities were reversed, and the Assessing Officer was directed to delete the penalty of ?6,09,970/- levied under Section 271(1)(c) of the Act. As a result, the appeal of the assessee was allowed.

The judgment was pronounced on 03/02/2021 by the Appellate Tribunal ITAT DELHI, with Members Bhavnesh Saini and Prashant Maharishi presiding over the case. The legal representatives for the appellant and respondents were Umang Luthra, Adv., and Rajesh Kumar, Sr. DR, respectively.