2021 (6) TMI 327 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - enhancement of income by CIT-A - HELD THAT - As against the enhancement made by CIT(A), assessee had carried the matter before the Tribunal. The Co-ordinate Bench of Tribunal 2020 (3) TMI 423 - ITAT DELHI had held the enhancement made by CIT(A) to be not tenable and therefore cancelled the order of enhancement passed by CIT(A). Thus the enhancement to income made by CIT(A) was annulled by ITAT. Since the impugned penalty levied u/s 271(1)(c) was on the enhancement made by CIT(A) and since the enhancement of income itself has been deleted by the Co-ordinate Bench of Tribunal the penalty order passed by CIT(A) does not survive - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2012-13.

Analysis:
The appeal filed by the assessee was against the order of the Commissioner of Income Tax (Appeals)-I, Noida, relating to Assessment Year 2012-13. The assessee, a Real Estate Developer, had initially declared total income at Rs. Nil for A.Y. 2012-13. However, the assessment by the Assessing Officer resulted in a total income of &8377; 6,00,200/-. Subsequently, the CIT(A) enhanced the income to &8377; 33,35,52,203/- through various additions under different sections of the Act. The CIT(A) then levied a penalty of 100% of tax sought to be evaded on the enhanced income of &8377; 33,24,08,002/- under section 271(1)(c) of the Act. The assessee appealed against this penalty order on multiple grounds challenging the validity and legality of the penalty imposed.

The main contention before the ITAT was the levy of penalty under section 271(1)(c) of the Act. The Learned AR argued that the CIT(A)'s order enhancing the income and subsequently levying the penalty was set aside by the ITAT in a previous appeal, rendering the penalty order void. The ITAT had found the enhancement made by the CIT(A) to be not tenable and had canceled the order of enhancement. As the penalty was based on the enhanced income, which was annulled by the ITAT, the ITAT held that the penalty order passed by the CIT(A) did not survive. Consequently, the ITAT directed the deletion of the penalty levied by the CIT(A) and allowed the grounds of the assessee's appeal.

In conclusion, the ITAT allowed the appeal of the assessee, directing the deletion of the penalty levied under section 271(1)(c) of the Act for Assessment Year 2012-13. The ITAT's decision was based on the annulment of the enhancement made by the CIT(A) by the ITAT in a previous appeal, rendering the penalty order invalid and non-sustainable.