TELESERVICES LTD.,KOLKATA vs. ACIT, CIR.12(2), KOLKATA

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ITA 517/KOL/2020Status: DisposedITAT Kolkata20 July 2021AY 2016-173 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the quantum appeal had set aside the CIT(A)'s enhancement order and restored the issue to the Assessing Officer. Consequently, the penalty imposed by the CIT(A) was cancelled as its foundation no longer existed.

What were the facts?

The assessee's income was enhanced by the CIT(A) due to inflated purchases, leading to a penalty under Section 271(1)(c). The assessee challenged the enhancement in a quantum appeal.

What were the issues?

Whether a penalty under Section 271(1)(c) can survive when the underlying addition/enhancement on which it is based has been set aside by a higher appellate authority.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA

Before: Shri P.M. Jagtap, Vice- & Shri A.T. Varkey

Date of concluding the hearing : July 15, 2021 Date of pronouncing the order : July 20, 2021

O R D E R Per Shri P.M. Jagtap, Vice-President:- This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-4, Kolkata dated 31.08.2020, whereby he imposed a penalty of Rs.6,10,78,620/- under section 271(1)(c) of the Income Tax Act, 1961.

2.

The assessee in the present case is a Company, which filed its return of income for the year under consideration on 31.10.2016 declaring total income of Rs.2,50,56,290/-. In the assessment completed under section 143(3) vide an order dated 19.12.2018, the total income of the assessee was determined by the Assessing Officer at Rs.2,70,03,840/- after making certain additions/disallowances.

United Teleservices Limited

3.

Against the order passed by the Assessing Officer under section 143(3) of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), it was noted by the ld. CIT(Appeals) that the assessee- company had inflated its claim for purchases made during the year under consideration and this aspect was not taken into consideration by the Assessing Officer while completing the assessment under section 143(3). He, therefore, issued an enhancement notice to the assessee-company. In reply to the said notice, a submission was made on behalf of the assessee offering its explanation in the matter and since the same was not found to be satisfactory by him, the ld. CIT(Appeals) proceeded to enhance the income of the assessee by Rs.20,35,95,402/- on account of the alleged inflated purchases vide his appellate order dated 11.02.2020. He also initiated the penalty proceedings under section 271(1)(c) in respect of the income of the assessee-company as enhanced by him on account of inflated purchases and since the explanation offered by the assessee in response to the show-cause notice issued by him during the course of penalty proceedings was not found acceptable, the ld. CIT(Appeals) proceeded to impose penalty of Rs.6,10,78,620/- under section 271(1)(c) being 100% of the tax sought to be evaded by the assessee-company on the income of Rs.20,35,95,402/- representing the alleged inflated purchases. Aggrieved by the order of the ld. CIT(Appeals) imposing penalty under section 271(1)(c), the assessee-company has preferred this appeal before the Tribunal.

4.

We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, the entire addition made by the ld. CIT(Appeals) by way of enhancement of income on account of alleged inflated purchases was challenged by the assessee in the quantum appeal filed before the Tribunal and the Tribunal vide its order dated 17.02.2021 passed in ITA

United Teleservices Limited No. 248/KOL/2020 has set aside the order of the ld. CIT(Appeals) dated 11.02.2020 and restored the issue relating to the alleged inflated purchases of Rs.20,35,95,402/- to the file of the Assessing Officer with a direction to decide the same afresh on merit after verifying the relevant details and documents produced/to be produced by the assessee- company. As rightly contended by the ld. Counsel for the assessee and agreed even by the ld. D.R., the very foundation of the impugned penalty imposed by the ld. CIT(Appeals) under section 271(1)(c) of the Act thus no more survives and the penalty so imposed by him is liable to be cancelled having no legs to stand. We may clarify that the Assessing Officer will be free to reinitiate the penalty proceeding depending on the outcome of set aside proceedings in accordance with law. We accordingly cancel the penalty imposed by the ld. CIT(Appeals) under section 271(1)(c) and allow this appeal of the assessee.

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