THE ITO, WARD-3(3)(5), AHMEDABAD vs. SHRI SHANTILAL RANCHODDAS PATEL, AHMEDABAD

Sole grievance of the Revenue is that the ld.CIT(A) has erred in cancelling penalty imposed by the AO of Rs.58,13,332/-under section 271(1)(c) of the Income Tax Act, 1961.

With the assistance of the ld.reprsentatives, we have gone through the record. It emerges out from the record that a search under section 132 of the Act was carried out in the Himalaya Group of case on 22.4.2018 and found and seized certain incriminating details. On the basis of certain admission by the assessee about payment in cash in some land transactions, the ld.AO framed assessment under section 143(3) read with section 147 of the Act and assessed the income of the assessee at Rs.1,74,75,870/- by making certain additions. Additions were contested by the assessee before the ld.first appellate authority, who partly allowed appeal of the assessee. Not satisfied with the order of the ld.CIT(A) the assessee went in appeal against part addition and the Revenue also came in appeal against part deletion before the Tribunal. In the meanwhile, the ld.AO initiated penalty proceedings under section 271(1)(c) of the Act and after hearing the assessee, the ld.AO imposed a penalty of Rs.58,13,332/-. Imposition of penalty was challenged before the ld.CIT(A), who after considering the material on record, deleted the impugned penalty and allowed appeal of the assessee. Aggrieved, Revenue is now in appeal before the Tribunal against the deletion of the impugned penalty under section 271(1)(c) of the Act.

Before us, at the outset, the ld.counsel for the assessee contended that the additions based on which the impugned penalty was imposed by the AO now do not exist, because the Tribunal vide common order dated 21.2.2019 in of the assessee and other ITA No.3679/Ahd/2015 and other two appeals of the Revenue, deleted the additions, and therefore, there is no room for the AO to visit the assessee with penalty under section 271(1)(c) of the Act. The ld.counsel for the assessee has placed on record copy of order of the Tribunal referred above in support of his above submissions. On the other hand, the ld.DR has not disputed the factual position of the additions deleted by the Tribunal as averred by the ld.counsel for the assessee.

We find 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 by 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 or furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. In the present case, the addition has been deleted by the Tribunal vide order dated 21.12.2019 cited supra, and therefore penalty under section 271(1)(c) of the Act has no limb to stand. Therefore, impugned order of penalty under section 271(1)(c) does not survive and the same stands cancelled. Appeal of the Revenue is, thus, dismissed.

In the result, appeal of the Revenue is dismissed.