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

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ITA 2606/AHD/2017Status: DisposedITAT Ahmedabad18 April 2019AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the basis for imposing the penalty was extinguished as the AO, in the fresh assessment order pursuant to the Tribunal's direction, did not make the additions on which the penalty was imposed. Therefore, the penalty does not survive.

What were the facts?

The assessee initially declared a low income, but the AO determined a significantly higher income, including long-term capital gains and interest, leading to a penalty. However, the Tribunal had previously remitted the issue to the AO for re-adjudication.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained when the additions forming the basis of the penalty are not made in the subsequent assessment order as per the Tribunal's directions.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 154,Section 54B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘C’

Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED

For Appellant: Shri Sakar Sharma, AR
For Respondent: Shri G.C. Daxini, Sr.DR
Hearing: 26/03/2019Pronounced: 18/04/2019

आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘C’

BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.2606/Ahd/2017 �नधा�रण वष�/Assessment Year: 2011-12 Nileshbhai R. Patel ITO, Ward-4(1)(2) 7, Muktanand Society Vs Baroda. Nr. Mental Hospital Karelibaug, Baroda 390 018. PAN : AIAPP 2041 G अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : Shri Sakar Sharma, AR Revenue by : Shri G.C. Daxini, Sr.DR

सुनवाई क� तार�ख/Date of Hearing : 26/03/2019 घोषणा क� तार�ख /Date of Pronouncement : 18/04/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-4, Vadodara dated 5.9.2017 passed for the Asstt.Year 2011-12.

2.

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.

3.

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

ITA No.2606/Ahd/2017 - 2 -

account of long term capital gain on sale of agriculture land was considered for visiting the assessee with penalty. It further emerges out that a rectification order under section 154 was passed on 5.9.2014 whereby the AO has observed an apparent mistake in allowing exemption of Rs.59,000/- under section 54B was not available, and he enhanced the capital gain assessable in his hand at Rs.18,72,989/-. Similarly, an addition of Rs.4019/- on account of interest on deposit in bank was also considered for visiting the assessee with penalty.

4.

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.

5.

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

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of the amounts on which penalty has been imposed and impugned in the present appeal.

6.

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.

7.

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

Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated, 18/04/2019

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