No Penalty u/s 271(1)(c) without addition-Quantification of penalty depended upon addition made to the income of the assessee – ITAT
ABCAUS Case Law Citation:
ABCAUS 2910 (2019) (05) ITAT
The assessee was in appeal before the Tribunal against the order of the CIT(A) in confirming the penalty imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961 (the Act).
The assessment order was passed under section 143(3) of the Act by making an addition on account of long term capital gain.
Subsequently, a rectification order under section 154 was passed whereby the AO disallowed exemption under section 54B. Similarly, an addition on account of interest on deposit in bank was also considered for visiting the assessee with penalty.
The additions travelled upto the Tribunal, and the Tribunal remitted the issue to the file of the AO for re-adjudication.
The AO passed a fresh assessment order under section 143(3) r.w.s. 254. In this assessment order, he determined the taxable income of the assessee by dropping the additions made in the first round.
Before the Tribunal the assessee contended that since additions had not been made by the AO, therefore, no penalty was imposable upon the assessee.
The Tribunal found that that original assessment order and order of the CIT(A) which led to penalty proceedings were set aside by the Tribunal. In pursuance to that order, the AO had passed fresh assessment order, whereby he did not make additions of the amounts on which penalty had been imposed.
The Tribunal observed that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable him, which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income and furnishing of inaccurate particulars of income.
The Tribunal opined that in other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. Since in the present case, basis for visiting the assessee with penalty had been extinguished by the AO by not making additions pursuant to the order of the Tribunal cited (supra), the impugned penalty did not survive. There was no room for the Revenue to impose penalty under section 271(1)(c).
Therefore, the Tribunal cancelled the impugned penalty and set aside both orders of the Revenue authorities passed under section 271(1)(c) of the Act.