2023 (7) TMI 1156 - AT - Income Tax

Penalty levied u/s 271(1)(c) - quantum addition with respect to Franchise Fees deleted and the issues pertaining to disallowance of air fare, travelling expenses, website charges, Lodging Boarding / food and catering charges have been remitted back to the Assessing Officer for a de-novo adjudication - DR submitted that there are contrary views taken by different benches of the Tribunal regarding the treatment of Franchise Fees and reference u/s 255(3) for constitution of Special Bench therefore, issues in the quantum appeal have not reached finality and that the penalty proceedings should be kept alive accordingly - HELD THAT - It is settled position that when the additions made in the assessment order, on the basis of which penalty for furnishing inaccurate particulars is levied, are deleted, there remains no basis at all for levying the penalty. Accordingly no penalty can survive and the same is liable to be cancelled as in the given case. With regard to the petition for constitution of Special Bench in our considered view until the constitution and pronouncement of the decision of the Special Bench, the decision of the coordinate bench in the quantum appeal is binding on us. In view of these discussions and considering the facts of the present case, we hold that the penalty levied is not sustainable. - Decided against revenue.

Summary

Issues:
The judgment deals with the penalty levied under section 271(1)(c) for assessment years 2011-12 and 2012-13 based on disallowances made during assessment under section 143(3).

For Assessment Year 2011-12:
The assessee, a subsidiary of a company involved in sports-related activities, filed returns showing losses and nil income for A.Y. 2011-12 and 2012-13 respectively. The Assessing Officer disallowed various expenses and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars. The penalty was levied, but the CIT(A) deleted it considering relief granted by the Tribunal in the quantum appeal. The Revenue appealed, arguing that the quantum appeal was not final, but the assessee contended that when disallowances are deleted in the quantum appeal, penalty proceedings cannot continue. The Tribunal noted that the additions were deleted in the assessment order and held that no basis existed for the penalty. The appeal for AY 2011-12 was dismissed.

For Assessment Year 2012-13:
The CIT(A) also deleted the penalty for AY 2012-13 based on similar grounds as for AY 2011-12. The Tribunal upheld the decision, stating that when additions are deleted in the quantum appeal, penalties cannot be sustained. As the facts were identical to AY 2011-12, the decision to delete the penalty for AY 2012-13 was upheld. The appeals filed by the Revenue were dismissed for both assessment years.