Loading judgment…
Facts
For AY 2014-15, the assessee's initial assessment under Section 143(3) determined a higher income than declared, leading to a penalty of Rs. 32,49,546 under Section 271(1)(c), which the CIT(A) later reduced to Rs. 16,24,773. The original assessment order was subsequently set aside by the ITAT, and a fresh assessment was passed accepting the assessee's returned income without any additions.
Held
The Tribunal held that since the underlying assessment, which formed the basis for the penalty, was set aside, and the fresh assessment made no additions to the declared income, the conditions for levying penalty under Section 271(1)(c) for concealment or furnishing inaccurate particulars of income were not met. Therefore, the penalty imposed was deleted.
Key Issues
Whether penalty under Section 271(1)(c) is sustainable when the underlying assessment order, which made additions, has been set aside and a fresh assessment accepts the returned income without making any additions.
Sections Cited
271(1)(c), 143(3), 254
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER RAJPAL YADAV, VP The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 29.03.2025 passed for assessment year 2014-15. 2. The grievance of the assessee is that ld.CIT (Appeals) has erred in confirming the levy of penalty amounting to A.Y.2014-15 2 Rs.16,24,773/- imposed u/s 271(1)(c) of the Income Tax Act by the ld. Assessing Officer.
With the assistance of the ld. Representative, we have gone through the record carefully. It emerges out from the record that assessee has filed its return of income on 03.11.2014 declaring an income of Rs.62,43,060/- and assessment order was passed u/s 143(3) on 13.12.2016 whereby income of the assessee was determined at Rs.1,09,53,555/-. The AO, thereafter, visited the assessee with penalty u/s 271(1)(c) of the Act vide his order dated 13.03.2020.He imposed a penalty @ 200% at Rs.32,49,546/-.
Dissatisfied with this penalty, assessee filed an appeal before the ld.CIT (Appeals) who has reduced the penalty to Rs.16,24,773/- by way of the impugned order.
It emerges out from the assessment record that assessment order was challenged by the assessee and ultimately dispute travelled upto the Tribunal. The ITAT has set aside the assessment order in vide its order dated 24.05.2022. The AO has passed a fresh A.Y.2014-15 3 assessment order on 27.02.2024 u/s 143(3) read with Section 254 of the Act. In this assessment order, AO has accepted the returned income declared by the assessee, hence, no additions have been made. The income has been determined at Rs.62,43,060/- which is equivalent to the returned income.
6. On due consideration of the facts, we are of the view that ld. First Appellate Authority has failed to take cognizance of this assessment order while deciding the penalty appeal. The penalty ought to have been deleted because no addition has been made to the total income of the assessee. A perusal of Section 271(1) sub-clause (c) of the Act contemplates that if the AO/CIT (Appeals)/PCIT, in the course of any proceeding under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty; as per such clause (iii),which read as under:
(iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the A.Y.2014-15 4 concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.
5.1 A perusal of the above clause would indicate that if an assessee is required to pay taxes on an addition made during the course of assessment, over and above the declared income, then such penalty would be calculated according to the above sub-clause (iii). In the present case, there is no addition made to the income of the assessee on which it can be alleged that assessee has evaded the taxes by reason of concealment of particulars of income or furnishing of inaccurate particulars. This charge is no more available against the assessee. Accordingly, no penalty could be computed upon the assessee. We allow the appeal of the assessee and delete the penalty.
In the result, appeal of the assessee is allowed.