2021 (10) TMI 663 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus loan and interest paid on bogus loans - HELD THAT - When the impugned addition that had found the very basis for imposing penalty u/s. 271(1)(c) of the Act had been vacated by the Tribunal, vide its order passed 2019 (6) TMI 584 - ITAT MUMBAI therefore, the consequential penalty imposed by the A.O cannot survive on a standalone basis and has to meet the same fate. On a perusal of the order of the CIT(A), we find that he had after taking cognizance of the fact that the impugned additions had been vacated by the Tribunal struck down the the penalty imposed by the A.O under Sec. 271(1)(c) - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against orders passed by CIT(A) for A.Y. 2012-13 and A.Y. 2014-15 regarding penalty under section 271(1)(c) of the Income Tax Act based on additions made by the Assessing Officer.

Analysis:

A.Y. 2012-13:
1. The assessee's return for A.Y. 2012-13 was selected for scrutiny assessment under section 143(2) of the Act.
2. The Assessing Officer (A.O) made additions totaling to ?2,40,00,000/- for bogus loans, ?1,37,750/- for interest on bogus loans, and ?92,000/- for commission on bogus loans.
3. Subsequently, a penalty of ?82,35,693/- was imposed by the A.O under section 271(1)(c) of the Act.
4. The CIT(A) deleted the penalty based on the Tribunal vacating the additions/disallowances made by the A.O.
5. The Revenue appealed the CIT(A)'s decision, arguing that the Tribunal's order on the quantum appeal was not accepted by the department.
6. The Tribunal upheld the CIT(A)'s decision, stating that once the additions were deleted by the Tribunal, the penalty could not stand alone and was unsustainable in law.
7. Consequently, the appeal filed by the Revenue for A.Y. 2012-13 was dismissed.

A.Y. 2014-15:
1. The issues and facts in the appeal for A.Y. 2014-15 were similar to those in the A.Y. 2012-13 appeal.
2. The Tribunal applied the same reasoning as in the previous appeal and dismissed the appeal for A.Y. 2014-15.
3. Both appeals filed by the Revenue for A.Y. 2012-13 and A.Y. 2014-15 were dismissed as they lacked merit.
4. The orders were pronounced on 06.10.2021.

In both cases, the Tribunal emphasized that once the Tribunal deleted the additions/disallowances that formed the basis for the penalty under section 271(1)(c) of the Act, the penalty could not be sustained. The decisions were based on the principle that if the additions were not upheld, the penalty imposed could not stand alone.