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Facts
The revenue preferred an appeal against the order of the NFAC which allowed the assessee's appeal against a penalty levied under Section 271(1)(c) of the Income Tax Act for assessment year 2013-14.
Held
The Tribunal held that since the order passed under Section 263, which directed the AO to proceed with the penalty, was quashed by a coordinate bench of the ITAT, the AO had no jurisdiction to levy the penalty. Therefore, the penalty was not sustainable.
Key Issues
Whether the penalty levied under Section 271(1)(c) is sustainable when the order directing the assessment proceedings (under Section 263) was quashed.
Sections Cited
271(1)(c), 263
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Income Tax Appellate Tribunal, DELHI BENCH “E”DELHI
ORDER PERSUDHIR KUMAR, JUDICIAL MEMBER: The revenue preferred the captioned appeal, challenging the order dated 30.12.2023 passed by the National Faceless Appeal Centre (In short “NFAC”), Delhi pertaining to assessment order for Assessment year 2013-14 dated 28.03.2019 passed under Section 271(1)( c) of the Income Tax Act, 1961 (“The Act for short”).
The revenue has raised following grounds of appeal :-
1. The Id. CIT(A) has erred in law and facts for the reason that he failed to appreciate correct facts of the case as it was very clearly mentioned in the assessment order that penalty proceedings are being initiated for furnishing inaccurate particulars of income.
2. The Ld. CIT(A) has erred in law and facts for the reason that he failed to appreciate correct facts of the case that the AO has duly mentioned the limb of section 271(1)(c) i.e.c furnishing inaccurate particulars of income under which penalty, was intended to be imposed in this case.2. The Ld. CIT9A) has erred in law and facts for the reason that he failed to appreciate correct facts of the case that the AO has duly mentioned the limb of section 271(1)(c) i.e. furnishing inaccurate particulars of income under which penalty was intended to be imposed in this case. 2
2. The Ld. CIT(A) has erred in law and facts for the reason that he failed to appreciate correct facts of the case that the AO has duly mentioned the limb of section 271(1)(c) i.e.e furnishing inaccurate particulars of income under which penalty was intended to be imposed in this case.
3. None appeared on behalf of the assessee. Hence, we proceeded to decide the appeal after hearing the Ld. DR for the Revenue.
4. The brief facts of the case are that the penalty was imposed by Assessing Officer, against which the assessee preferred the appeal before the Ld. CIT(A) who vide order dated 28-03-2019 allowed the appeal against which the revenue is in appeal before the Tribunal. The Ld. PCIT passed the order under Section 263 and gave the direction to the AO, and the AO completed the assessment on 27.12.2017. Accordingly, penalty proceedings were initiated for furnishing inaccurate particulars. Declining the contention raised by the assessee the AO proceeded to levy the penalty u/s. 271 (1)(c) of the Act.
At the time of hearing the Ld. DR fairly conceded that the appeal filed by the assessee against the order of the Ld. PCIT u/s 263 of the Act was allowed by the ITAT.
We have heard the Ld. DR and perused the material available on record. At the very outset it is brought to our notice by the Ld. DR that the order passed u/s. 263 was quashed by the coordinate Bench of the ITAT and thus there is no jurisdiction with AO to proceed on the directions given by ld. PCIT in the order passed u/s.
Under these circumstances, penalty levied is not sustainable. The Ld. CIT(A) has rightly allowed the appeal filed by the assessee against the penalty. Accordingly, in these circumstances the penalty levied by the AO is not sustainable.
In view of the law laid down by the Hon'ble Apex Court in case cited as K.C. Builders & Anr vs. ACIT 265 ITR 562 (SC) because "when the addition made in the assessment order on the basis of which penalty for concealment is levied have been deleted there remains no basis at all for levying the penalty for concealment and in such case, no penalty can survive and the penalty is liable to be cancelled." So, in view of the matter, the appeal filed by the revenue is liable to be dismissed.
In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 25/06/2025.