INCOME TAX OFFICER, LUDHIANA vs. BALPREET SINGH, LUDHIANA

Though the Revenue has taken five grounds of appeal but its grievance revolves around a single issue, namely, ld.CIT (Appeals) has erred in deleting the penalty levied u/s 271(1)(c) of the Income Tax Act,

The brief facts of the case are that assessee has filed his return of income on 14.10.2016 declaring an income of Rs.1,73,360/-. The ld. AO has passed an ex-parte assessment order u/s 147 read with Section 144 of the Act on 24.03.2022. He determined the taxable income of the assessee at Rs.33,07,37,215/-. The AO has initiated penalty proceedings u/s 271(1)(c) of the Act for concealment of income. The AO has ultimately imposed a penalty of Rs.11,45,21,533/- in an ex-parte penalty order passed on 24.09.2022.

Dissatisfied with the penalty order, assessee carried the matter in appeal before the ld.CIT (Appeals). The ld.CIT (Appeals) has deleted the penalty by way of the impugned order on the ground that assessment order passed u/s 144 read with Section 147 has been set aside by the CIT (Appeals)(NFAC) vide order dated 26.06.2025. Thus, according to the CIT (Appeals), there is no basis available to the AO to compute the penalty on the alleged addition of Rs.33 Crore which has already been set aside by the CIT (Appeals). Accordingly, the ld.CIT (Appeals) has allowed the appeal of the assessee.

In response to the notice of hearing, no one has come present on behalf of the assessee.

With the assistance of ld. DR, we have gone through the record carefully. Sub-clause (iii) of Section 271(1)(c) of the Act provides that penalty would be computed on the additions made to the income of the assessee qua which, particulars have been inaccurately furnished or income was concealed. Thus, it postulates that there should be an addition to the declared income by the AO, on the basis of which, a penalty could be calculated either equal to the taxes sought to be evaded or 300 times of such taxes. In the present case, the very foundation of additions made by the AO has already been deleted by the CIT (Appeals) by setting aside the assessment order, therefore, there is no basis to calculate the penalty imposable upon the assessee. Thus, ld.CIT (Appeals) has rightly allowed the appeal of the assessee and deleted the penalty. It is for the AO to appreciate whether fresh penalty is to be imposed upon the assessee or not after giving effect to the order of the CIT (Appeals) in quantum proceedings. For argument sake, we observe that if no addition is being made A.Y. 2016-17 4 to the income of the assessee, then no penalty would be imposable upon the assessee. Similarly, if AO found that there is a plausible explanation by the assessee of any such addition, then also no penalty will be imposable. Hence, it is in the discretion of the AO to visit the assessee or not to visit the assessee with penalty after fresh assessment order is being passed. We do not find any error in the order of the ld.CIT (Appeals), accordingly, this appeal is dismissed.

In the result, the appeal of the Revenue is dismissed.