2021 (7) TMI 43 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - addition of notional interest in HDFC Bank account - HELD THAT - Since the addition has been deleted, the penalty so levied must also be deleted. Sublato Fundamento Cadit Opus, meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation addition has been removed, the super structure i.e. penalty must fall. We, accordingly, direct the ld. CIT(A) to delete the penalty so levied.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on addition of notional interest in HDFC Bank account.

Analysis:
The judgment involves four separate appeals by the assessee against the order of the ld. CIT(A)-30, New Delhi dated 22.08.2017 pertaining to A.Ys. 2008-09 to 2011-12. Common issues concerning the levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 due to the addition of notional interest in an HDFC Bank account were raised in all appeals. The Tribunal had previously deleted the quantum addition related to notional interest in a similar case, emphasizing the importance of concrete evidence to support such additions. The Tribunal highlighted that in the absence of corroborative evidence, additions made solely on the basis of presumption are not sustainable. The Tribunal also referenced various legal precedents to support its decision, emphasizing the need for actual evidence before taxing notional interest income.

The Tribunal noted that the addition of notional interest was made purely on a hypothetical basis without any concrete evidence to substantiate the claim. The Tribunal emphasized that the case of the assessee differed significantly from previous cases where some basis for taxation existed. In this instance, the addition of notional interest lacked any factual basis and was deemed entirely imaginary. As there was no evidence to support that the assessee had actually received interest on the disputed deposit, the Tribunal upheld the decision of the CIT(A) to delete the addition of notional interest. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.

Considering that the addition of notional interest had been deleted, the Tribunal ruled that the penalty levied based on the same foundation must also be deleted. The principle of "Sublato Fundamento Cadit Opus" was applied, indicating that if the foundation (addition) is removed, the superstructure (penalty) falls. Therefore, the Tribunal directed the ld. CIT(A) to delete the penalty that was imposed. As a result, the appeals of the assessee in ITA Nos. 6295 to 6298/DEL/2017 were allowed, and the penalty was consequently deleted.