RAJNISH TALWAR,NEW DELHI vs. ACIT, CENTRAL CIRCLE-4, NEW DELHI

As per its grounds of appeal, the assessee has challenged the imposition of penalty under Section 271(1)(c) amounting to Rs.20,08,153/- in Assessment Year 2014-15 and varied amounts in other captioned appeals for different assessment years.

The ld. counsel pointed out that the penalty has been imposed by the CIT(A) in exercise of powers vested under Section 250(6) r.w. Section 271(1)(c) of the Act on enhancements made by CIT(A) by way of deemed dividend under Section 2(22)(e) of the Act. In this context, it was pointed out that the enhancements lacks valid and lawful basis and such enhancement action is without any authority of law. It was thereupon pointed out that the assessment itself has been quashed and rendered non-est by the ITAT and therefore enhancements made on the non-est assessment has lost its very foundation and therefore no addition by way of enhancement can be deemed to exist in the quantum proceedings. It was thus contended that when the assessment itself has been quashed as a non-est on the grounds of invalid approval granted under Section 153D of the Act, the CIT(A) is incapacitated in law to make enhancement of any sort on such non-est assessment. The ld. counsel thus submitted that the penalty imposed on enhancements carried out by the impugned first appellate order deserves to be quashed.

The ld. DR for the Revenue did not rebut any of the observations made on behalf of the assessee. 6. On consideration of rival submissions and on perusal of the case records, we notice that the quantum appeals in relation to the captioned appeals have been adjudicated in favour of the assessees and the assessment orders itself have been quashed. This being so, the penalty imposed in the enhancement proceedings on the basis of nonest quantum proceedings would automatically cease to exist owing to lack of foundation. The penalty imposed in the enhancement proceedings in these peculiar facts is thus rendered unsustainable in law.

In the result, all the appeals of the assessees are allowed. Order pronounced in the open Court on 27/06/2022.