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Facts
The Revenue filed an appeal against the order of the CIT(A) which had deleted an addition made by the AO on account of sale of shares claimed as long-term capital gain. The addition was originally made under Section 271(1)(c) for alleged accommodation entry in penny stock trading.
Held
The Tribunal held that the penalty imposed under Section 271(1)(c) was based on the addition made by the AO. Since a co-ordinate bench of the Tribunal had already deleted this addition by allowing the assessee's appeal, the foundation for the penalty no longer existed.
Key Issues
Whether the penalty levied under Section 271(1)(c) can survive when the underlying addition has been deleted by a co-ordinate bench?
Sections Cited
271(1)(c), 68, 147, 143(3)
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Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL
Present for: Assessee : Shri Mitul Doshi,CA Revenue : Shri Annavaran Kosuri, Sr. DR Date of Hearing : 22.07.2025 Date of Pronouncement : 31.07.2025 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2024-25/1072797898(1), dated 31.01.2025 passed against the assessment order by the National Faceless Assessment Centre, Delhi, u/s. 271(1)(c) of the Income-tax Act (hereinafter referred to as the “Act”), dated 29.12.2021 for Assessment Year 2012-13.
Grounds taken by the Revenue are reproduced as under:
Ramesh Jamnadas Thakkar AY 2012-13 “1. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee is one ofthe beneficiaries in the transactions of sale and purchase of scrip of M/s. Divine Multimedia (India) Ltd. (penny stock).
2. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee failed to satisfactorily explain the account of income from other sources u/s 68.
3. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in allowing the appeal of the assessee despite the fact that BSE limited has confirmed the transactions and provided the details of assessee that shares of M/s. Divine Multimedia (India) Ltd. were purchased and the same were sold in A.Y 2012-13, resulting in difference of Rs.4,53,849/-.”
The present appeal is in respect of levy of penalty of Rs. 83,324/- u/s. 271(1)(c). On merits, an addition of Rs. 4,53,849/- was made on account of sale of shares claimed as long term capital gain which was added u/s. 68 in the assessment completed u/s. 147 r.w.s 143(3). Ld. AO had made an addition of this amount alleging the assessee being one of the beneficiary of accommodation entry by way of trading in penny stock scrip. Matter went upto the Tribunal in ITA No. 823/Mum/2022. Co-ordinate bench on dealing with the merits of the case, deleted the addition so made and allowed the appeal of the assessee vide order dated 29.11.2022. In the present case, it is penalty which has been imposed on the addition made by the ld. AO which has been deleted by the co-ordinate bench as aforesaid. Since the very foundation on which the penalty was levied has been eroded by way of allowing the appeal of the assessee by the co-ordinate bench, the penalty so imposed does not survive.
In the result, appeal of the Revenue is dismissed.
Order is pronounced in the open court on 31 July, 2025