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Facts
The assessee, engaged in manufacturing and sale of methyl ester, filed a return of income declaring a loss. The case was selected for scrutiny, and after various notices and proceedings, an assessment order was passed. Subsequently, penalty proceedings were initiated, leading to a penalty order. The CIT(A) upheld the penalty order.
Held
The Tribunal held that since all additions made in the assessment order were deleted by the ITAT, the penalty order based on those additions was unsustainable. Furthermore, the Tribunal noted that penalty cannot be imposed when expenses are claimed on the strength of an audit report by a CA, citing a Supreme Court judgment.
Key Issues
Whether a penalty order is sustainable when the underlying assessment order's additions have been deleted. Whether penalty can be imposed for expenses claimed on the strength of an audit report.
Sections Cited
250, 143(1), 143(3), 143(2), 142(1), 274, 271(1)(b), 144, 271(1)(c)
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal of assessee is against order dated 15.07.2024 of Learned Commissioner of Incom-Tax (Appeals)/National Faceless Appeal Centre (National Faceless Assessment Centre (NFAC)), Delhi (hereinafter referred as “Ld. CIT(A)” under Section 250 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of penalty order dated 31.03.2022 by the National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred as “Ld. AO") under Section 143(3) of the Act for assessment year 2015-16.
Brief facts of case are that appellant/assessee is engaged in the business of manufacturing and sale of methyl ester and filed its return of income declaring loss at Rs.7,38,44,274/- on 30.09.2015 which was processed under Section 143(1) of the Act. Subsequently, the case was selected for complete scrutiny through CASS. Notices under Section 143(2) of the Act dated 04.04.2016, notices under Section 142(1) dated 12.04.2016, 03.03.2017 and 01.08.2017 were issued. Notice under Section 274 r.w.s. 271(1)(b) dated 23.11.2017 and notice under Section 144 dated 22.01.2017 were issued. On 27.12.2017, Shri Yash Berry, CA & AR appeared for hearing with basic financials of the assessee. On completion of proceedings, Ld. AO passed assessment order dated 30.12.2017. Separate penalty proceedings were initiated. Show-cause-notices for penalty under Section 271(1)(c) of the Act dated 28.02.2019 and 17.03.2022 were issued. On conclusion of penalty proceedings, Ld. AO passed penalty order dated 31.03.2022.
Against order dated 31.03.2022, appellant/assessee preferred appeal before Ld. CIT(A) which was dismissed vide order dated 15.07.2024.
Being aggrieved, appellant/assessee preferred present appeal.
Learned Authorized Representative for appellant/assessee submitted that Ld.CIT(A) erred in confirming penalty order without valid reason to believe that the assessee has concealed particulars of his income and furnished incorrect particulars of income. All additions made in assessment order under Section 143(3) dated 30.12.2017 were deleted by ITAT in CO No. 81/Del/2019 and vide order dated 31.05.2024. The penalty order dated 31.03.2022 was unsustainable since expenses were claimed on the strength of audit report by CA as held by Hon'ble Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC).
Learned Authorized Representative for Revenue relied on orders of Departmental Authorities.
From examination of record in light of aforesaid rival contentions, it is crystal clear that penalty order dated 31.03.2022 under Section 271(1)(c) of the Act is in pursuance to assessment order dated 30.12.2017. Hon’ble ITAT, Delhi vide order dated 31.05.2024, in CO No. 81/Del/2019 and had deleted all the additions made in assessment order dated 30.12.2017. Moreover, penalty cannot be imposed as expenses were claimed on strength of audit report by CA, as per ratio of judgment in CIT vs. Reliance Petroproducts’s case (supra). Therefore, the penalty order dated 31.03.2022 being unsustainable in the eyes of law is set aside. The grounds of appeal nos. 1 to 3 are allowed.
8. In the result, the appeal of appellant/assessee is allowed.