2021 (9) TMI 1163 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessment u/s 153A/153C - HELD THAT - Since ITAT has already granted relief to the assessee in quantum proceedings 2019 (4) TMI 700 - ITAT DELHI , now there is no basis to hold penalty proceedings against the assessee. - Decided in favour of assessee.

Issues Involved:

1. Legality of proceedings initiated under Section 271(1)(c) of the Income-tax Act, 1961.
2. Examination and explanation of issues during assessment and penalty proceedings.
3. Evidentiary value of collaboration and supplemental agreements.
4. Consideration of detailed submissions during appellate proceedings.
5. Justification for rejecting the appellant's request to keep proceedings in abeyance.
6. Impact of ITAT's decision on quantum addition on penalty proceedings.
7. Allowance of appeal with costs.

Issue-wise Detailed Analysis:

1. Legality of Proceedings Initiated under Section 271(1)(c):
The appellant contended that the proceedings under Section 271(1)(c) were initiated based on incorrect facts, rendering the impugned order illegal, invalid, and bad in law. The Tribunal noted that the penalty proceedings were based on documents seized during a search, resulting in an addition and subsequent penalty imposition of ?15,45,000 under Section 271(1)(c). However, the ITAT had already granted relief to the assessee in quantum proceedings, thereby nullifying the basis for penalty.

2. Examination and Explanation of Issues during Assessment and Penalty Proceedings:
The appellant argued that all issues were fully examined and explained during both assessment and penalty proceedings. The CIT(A) failed to appreciate these explanations, leading to a dismissal of the appeal contrary to the facts of the case. The Tribunal observed that the CIT(A) did not adequately consider the detailed submissions made by the appellant.

3. Evidentiary Value of Collaboration and Supplemental Agreements:
The appellant highlighted that the collaboration agreement dated 2nd April 2009, and the supplemental agreement dated 1st July 2010, were misinterpreted. The collaboration agreement mentioned an advance payment of ?1.00 crore, but the actual payment of ?50,00,000 by cheque was made in the financial year 2010-11. The appellant contended that the supplemental agreement was made before the search operation, contrary to the CIT(A)'s findings. The Tribunal acknowledged these contentions, noting the discrepancies in the CIT(A)'s judgment.

4. Consideration of Detailed Submissions during Appellate Proceedings:
The appellant claimed that the CIT(A) did not consider the detailed submissions made during the appellate proceedings, leading to an unreasonable and arbitrary decision. The Tribunal found merit in this argument, emphasizing that the CIT(A) relied on extraneous, irrelevant, and incorrect facts.

5. Justification for Rejecting the Appellant's Request to Keep Proceedings in Abeyance:
The appellant argued that the CIT(A) was not justified in rejecting the request to keep the proceedings in abeyance, especially since the quantum addition matter was pending before the ITAT. The Tribunal noted that the quantum appeal had been disposed of by the ITAT, which deleted the addition of ?50,00,000, making the penalty unsustainable.

6. Impact of ITAT's Decision on Quantum Addition on Penalty Proceedings:
The appellant highlighted that the ITAT's decision to delete the quantum addition of ?50,00,000 nullified the basis for sustaining the penalty. The Tribunal agreed, stating that since the ITAT had granted relief in the quantum proceedings, there was no basis to hold penalty proceedings against the assessee.

7. Allowance of Appeal with Costs:
The appellant requested that the appeal be allowed with costs. The Tribunal allowed the appeal, directing the Assessing Officer to delete the penalty, but did not explicitly mention costs.

Conclusion:
The Tribunal concluded that since the ITAT had already granted relief to the assessee in quantum proceedings, there was no basis to hold penalty proceedings. The appeal filed by the assessee was allowed, and the Assessing Officer was directed to delete the penalty. The order was pronounced in the open court on 31st August 2021.

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