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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI C.N. PRASAD, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Kirit Sanghavi Shri Vijay Kumar Menon
O R D E R PER C.N. PRASAD (JM)
This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 25, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 06.06.2019 for the Assessment Year 2012-13.
The only grievance of the Revenue in its appeal is that the Ld.CIT(A) deleted the penalty levied u/s. 271(1)(c) of the Act on the ground that (A.Y: 2012-13) M/s. Shree Harshad Jewellers quantum additions/disallowance were deleted by the Hon'ble ITAT vide order in ITA.No. 447/Mum/2018 dated 16.05.2018 for the Assessment Year 2012-13.
Learned Counsel for the assessee submitted that, in this case the Hon'ble Bench had deleted the additions/disallowances made in the Assessment Order passed u/s. 143(3) of the Act which was the basis for levying the penalty u/s. 271(1)(c) of the Act. Learned Counsel for the assessee submitted that since the Tribunal deleted the additions/disallowance in the quantum proceedings the penalty u/s.271(1)(c) of the Act will not survive and therefore the Ld.CIT(A) has rightly deleted the penalty.
Ld. DR vehemently supported the order of the Assessing Officer.
We have heard the rival submissions, perused the orders of the authorities below. It is the finding of the Ld.CIT(A) that the Tribunal had deleted the additions/disallowances made in the quantum proceedings in ITA.No. 447/Mum/2018 dated 16.05.2018. The Tribunal in quantum proceedings deleted the addition observing as under: - “7. We have heard the rival submissions and perused the relevant materials on record. In Nikunj Eximp Enterprises (P.) Ltd. (supra), the Tribunal vide order dated 30.04.2010 while allowing the appeal records that the respondent-assessee had filed letters of (A.Y: 2012-13) M/s. Shree Harshad Jewellers confirmations of suppliers, copies of invoices for purchases and stock statement i.e. stock reconciliation statement. This reconciliation statement gave complete details with regard to opening stock, purchases, sales and closing stock and no fault with regard to it was found. Besides, substantial amount of sales made by the respondent- assessee was to government department i.e. Defence Research & Development Laboratory, Hyderabad and such sales could not be bogus. Besides the books of account of the respondent-assessee have not been rejected. In view of the above, by order dated 30.04.2010 the Tribunal deleted the disallowance of Rs.1.33 crores by holding that the purchases were not bogus. In further appeal the Hon’ble Bombay High Court agreed with the reasons given by the Tribunal and dismissed the appeal filed by the Revenue. In the instant case, the assessee has filed before the AO the ledger confirmations of purchases from parties who supplied more than Rs.10,00,000/- during the year under consideration. The AO has received it on 19.02.2015. Those confirmations are at page 8-17 of the P/B. The ledger account with purchase bills of all unregistered vendors are at page 18-118 of the P/B. The proof of payment through bank statements are at page 119 to 139 of the P/B. The quantitative tally is at page 140-147 of the P/B. In the instant case, the AO has issued notice u/s 133(6) to four parties which were returned by the postal authorities as ‘unserved’. Then he mentions that the appellant has made purchases of Rs.2,26,40,410/- from unrecognized parties. The estimation of profit by the AO @ 12.5% on the above amount of Rs.2,26,40,410/- is devoid of any substance. There is no basis for estimating income without rejecting the books of accounts. The ratio laid down in the decision in Nikunj Eximp Enterprises (P.) Ltd. (supra) is squarely applicable in the instant case. Respectfully following the same, we delete the disallowance of Rs.28,30,051/- made by the AO.”
Since the addition made in the quantum proceedings was deleted by the Tribunal, the Ld.CIT(A) followed the order of the Tribunal and also the decision of the Hon'ble Supreme Court in the case of KC Builders [265 ITR 562] deleted the penalty observing as under: -
(A.Y: 2012-13) M/s. Shree Harshad Jewellers “5. The facts of the case, the submission of the assessee and the arguments of the AR are carefully considered. In the case of the assessee, the entire addition made by the AO stands cancelled by the order of the ITAT. Since the addition on the basis of which the penalty had been levied by the AO no longer survives, the penalty order u/s 271(1)(c) of the Act also becomes infructuous. This is also in line with the decision of the Supreme Court in the case of K.C. Builders vs. ACIT [2004] 265 ITR 562 (SC). In this order the Hon'ble Court has observed as under: 'In order that a penalty under section 271(1)(iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled......." 5.1 Similar decisions have been given in CIT vs. Continental Air Express (P) Ltd [2009] 176 Taxman 41 (Delhi); CIT vs. Babul Harivadan Parikh [2014] 222 Taxman 159 (Gujarat); Amrut Tubewell Co. vs. ACIT [2015] 234 Taxman 756 (Gujarat); Anusandhan Investment Ltd in dated 10.05.2013; M/s Sarjan Texturisers (P) Ltd vs. ITO in ITA No.ll88/Ahd/2010 dated 10.12.10; CIT vs. Mohd. Bux Shokat Ali [2004] 265 ITR 326 (Rajasthan); City Dry Fish Co. vs. CIT [1999] 238 ITR 63 (Andhra Pradesh); Addl. CIT vs. Badri Prasad Kashi Prasad [1993] 200 ITR 206 (All.) and CIT v. Bahri Bros. (P. ) Ltd. [1987] 167 ITR 880 (Pat.) to name a few. 5.2 In view of the above, the penalty levied by the AO of Rs.8,74,485/- vide order dated 13.03.2018 is held to be infructuous and is deleted. All the grounds of the appeal of the assessee are treated as allowed.”
On a perusal of the order of the Ld.CIT(A) we do not find any infirmity in the order passed in deleting the penalty since the very basis
(A.Y: 2012-13) M/s. Shree Harshad Jewellers for levy of penalty i.e. addition made in the assessment proceedings was deleted by the Tribunal and in which case penalty will not survive. Hence the Ld.CIT(A) rightly deleted the penalty. Thus, we confirm the order of the Ld.CIT(A) in deleting the penalty. Ground raised by the Revenue is rejected.
In the result, appeal of the Revenue is dismissed.
Order pronounced on 10.03.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.