2019 (3) TMI 84 - AT - Income Tax

Penalty imposed u/s 271(1)(c) - Search and seizure action u/s 132 - fresh assessments were completed u/s 153A - HELD THAT - In view of the fact that the Tribunal has held the assessment proceedings u/s 153A of the Act as being void ab initio and invalid and has also deleted the additions on merits in all the four years under appeal, the impugned penalties do not survive. The orders of the CIT (Appeals) are set aside and the impugned penalties are directed to be deleted - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty imposed under section 271(1)(c) of the Income Tax Act for multiple assessment years.

Analysis:
The judgment pertains to four appeals filed by the assessee challenging the confirmation of penalties imposed under section 271(1)(c) of the Income Tax Act for different assessment years. The assessee, an Association of Distillers in Uttar Pradesh, had been granted registration under section 12AA of the Act. A search and seizure action was conducted at the residence of the Secretary General of the Association and its premises. Subsequently, fresh assessments were completed under section 153A of the Act for all the relevant years, and penalty proceedings under section 271(1)(c) were initiated. The assessee's appeals in the quantum assessments were dismissed by the CIT (Appeals), but the ITAT allowed the appeals, deleting the quantum additions in its order dated 14.12.2018. The ITAT held that the action taken under section 153A against the assessee was void ab initio and illegal as no search had taken place in the case of the assessee. Additionally, the ITAT found that the quantum additions made to the assessee's returned income were unsustainable in facts and law.

The Authorized Representative submitted the ITAT order in the quantum proceedings, arguing that since the quantum additions had been deleted by the ITAT, the impugned penalties should not stand. The CIT-DR supported the lower authorities' orders but acknowledged that the quantum proceedings had been settled in favor of the assessee by the Tribunal. Consequently, considering the ITAT's findings that the assessment proceedings under section 153A were void ab initio and that the additions on merits were deleted for all the years under appeal, the penalties were deemed not sustainable. Therefore, the orders of the CIT (Appeals) were set aside, and the penalties were directed to be deleted. As a result, all four appeals of the assessee were allowed, and the penalties were removed. The order was pronounced in the open court on 27.02.2019.