SHRI NILESHBHAI R PATEL,BARODA vs. THE ITO, WARD 4(1)(2),, BARODA

Solitary grievance of the assessee is that the ld.CIT(A) has erred in confirming the penalty amounting to Rs.3,86,240/- imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961.

Brief facts of the case are that the assessee has filed his return of income declaring total income at Rs.48,030/-. Assessment order was passed on 18.3.2014 under section 143(3) of the Act. His total income was determined at Rs.18,65,990/-. Addition of Rs.18,13,939/- on

The ld.counsel for the assessee at the very outset submitted that these additions travelled upto the Tribunal, and the Tribunal has remitted this issue to the file of the AO for re-adjudication. The AO has passed a fresh assessment order on 5.12.2018 under section 143(3) r.w.s. 254. In this assessment order, he determined the taxable income of the assessee at Rs.52,050/- as against Rs.19,24,991/- determined in the first round, after rectification passed under section 154 on 10.9.2014. The ld.counsel for the assessee has placed on record copy of the assessment order, and contended that since additions have not been made by the AO, therefore, no penalty is imposable upon the assessee. The ld.DR was unable to controvert this contention of the ld.counsel for the assessee.

On due consideration of the above facts, we find that original assessment order and order of the ld.CIT(A) which led to this penalty proceedings were set aside by the Tribunal vide order dated 29.8.2017 passed in ITA No.3337/Ahd/2015. In pursuance to this order, the AO has passed fresh assessment order, whereby he did not make additions

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 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 and 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. Since in the present case, basis for visiting the assessee with penalty has been extinguished by the AO by not making additions pursuant to the order of the Tribunal cited (supra), the impugned penalty does not survive. In other words, there is no room for the Revenue to impose penalty under section 271(1)(c) in this case. Therefore, we cancel the impugned penalty and set aside both orders of the Revenue authorities passed under section 271(1)(c) of the Act.

In the result, appeal of the assessee is allowed. Pronounced in the Open Court on 18th April, 2019.