SHRI. GAURAV TRIYUGI SINGH,MUMBAI vs. ITO WARD 3 (1)(5), MUMBAI

Briefly the facts are, the assessee is an individual. For the assessment year under dispute, assessee filed his return of income on 15-10-2010 declaring income of Rs.17,04,320/-. In the course of assessment proceedings, the Assessing Officer, on verifying the details on record found that as per the financial statement, during the year under consideration, the assessee had taken following unsecured loans :- (1) Meena Singh Rs.3,95,000/- (2) Dhirendra Singh Rs.5,40,000/- (3) Savitri Thakur Rs.17,00,000/- 3. After calling upon the assessee to furnish various details including loan confirmations to prove the genuineness of the loan, the Assessing Officer ultimately added back the entire unsecured loan of Rs.26,35,000 under section 68 of the Act by treating it as non genuine. Besides the above addition, the Assessing Officer made some other additions, which enhanced the total income to Rs.78,98,640. However, for the purpose of the present appeal what is relevant is, only the addition made of Rs.26,35,000/-. Against the aforesaid addition, the assessee went in appeal before the first appellate authority and thereafter before the Tribunal. The Tribunal, while deciding the appeal in dated 11-05-2017 accepted the submissions of the assessee and deleted an amount of Rs.12,35,000/- out of the addition made. In other words, the Tribunal sustained addition to the extent of Rs.14 lakhs representing unsecured loan taken from Savitri Thakur. On the basis of the addition sustained by the Tribunal, the Assessing Officer passed an order on 30-01-2018 imposing penalty of Rs.4,20,000/- under section 271(1)(c) of the Act. Though the assessee contested the penalty order before the first appellate authority; however, he was unsuccessful.

Before us, the learned Counsel for the assessee submitted, the addition of Rs.14 lakhs, in the meanwhile, has been deleted by the Hon’ble Bombay High Court while deciding assessee’s appeal in Income Tax Appeal No.1750 of 2017 vide order dated 22-01-2020. A copy of the order was placed before the Bench. Thus, he submitted, the addition having been deleted, the penalty imposed should also be deleted.

The learned Departmental Representative fairly submitted, since, the quantum has been decided in favour of the assessee, penalty cannot be sustained.

We have considered rival submissions and perused the material available on record. Undisputedly, the subject matter of imposition of penalty u/s 271(1)(c) of the Act is the addition of Rs.14 lakhs made under section 68 of the Act being sustained by the Tribunal. However, as could be seen from the order of the Hon’ble jurisdictional High Court referred to above, the addition sustained by the Tribunal has been deleted while deciding assessee’s appeal. Thus, when the addition on the basis of which penalty has been imposed no longer exists, the penalty imposed under section 271(1)(c) cannot exist. Accordingly, we delete the penalty imposed of Rs.4,20,000/-. Grounds are allowed.

In the result, appeal is allowed.