INCOME TAX OFFICER, WARD-3-2, JAIPUR vs. SILVER SAND BUILDERS PVT. LTD., JAIPUR

jktLo dh vksj ls@ Revenue by : Shri Ashok Khanna (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri S. R. Sharma (CA) lquokbZ dh rkjh[k@ Date of Hearing : 13.05.2019. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 14/05/2019. vkns'k@ ORDER

PER VIJAY PAL RAO, JM :

“ Whether in the facts and in the circumstances of the case and in law, the ld. CIT (A) was justified in deleting the penalty u/s 271(1)(c) of the I.T. Act amounting to Rs. 26,00,670/- when the deletion of quantum addition by the Hon’ble ITAT in had not been accepted on merits.”

(i) I have duly considered the submission of the appellant, the penalty order and the material placed on record. It is noted that vide appellate order dated 27.04.2018 in for the year under consideration, the appeal of the appellant has been allowed and the addition has been deleted by the Hon’ble ITAT, Jaipur by observing as under :-

“ 7. ……..Accordingly, in the facts and circumstances of the case, we are of the considered view that the ALV of the property in question would be Nil as it was not possible to let out the property during the year under consideration and further the unauthorized construction of the property is otherwise not eligible for determination of standard rent or rateable value and consequently there is no basis for determination of ALV of the property under section 23(1)(a) of the Act. Hence we delete the addition made by the A.O.”

(ii) Thus, there remains no basis for imposition of penalty u/s 271(1)(c) of the Act as far as addition of Rs. 81,75,605/- is concerned. It may be mentioned that in the case of K.C. Builders vs. ACIT (2004) 135 Taxman 461 (SC), it has been held by the Hon’ble Apex Court that :

“ Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, the penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled as in the instant case ordered by the Tribunal and later cancellation of penalty by the authorities.”

(iii) Further, no penalty could be levied on the basis of adhoc disallowance of rs. 2,40,804/- made by the AO in the assessment order out of various expenses claimed by the appellant without bringing on record any positive material, which may justify the imposition of penalty u/s 271(1)(c) of the Act. In view of the above discussion, the penalty of Rs. 26,00,670/- imposed by the AO u/s 271(1)(c) of the Act has no legs to stand and cannot be upheld, hence cancelled.”

The revenue has not disputed the fact that the addition made by the AO has been deleted by this Tribunal in the quantum appeal as referred by the ld. CIT (A) in the impugned order. However, the revenue has challenged the order of the ld. CIT (A) cancelling the penalty levied under section 271(1)(c) only on the ground that the order of this Tribunal in quantum appeal has not been accepted by the revenue.

The revenue has not produced any record or even claimed that the said order of the Tribunal dated 27.04.2018 in quantum appeal has been reversed by the Hon’ble High Court. Accordingly, in the facts and circumstances of the case, when the addition itself is not in existence then the penalty levied under section 271(1)(c) has no legs to stand.

Order is pronounced in the open court on 14/05/2019.