M/S. KRISHNAMURTHY B NARAYANAN,BANGALORE vs. INCOME TAX OFFICER, WARD- 2(2)(3), BANGALORE

Grounds No.1 & 2 are with regard to the validity of levy of penalty in the light of the decision of Hon’ble jurisdictional High court in the case of CIT vs. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Kar – HC) due to the defect in the notice issued u/s 274 r.w.s 271 of the Act. Grounds No.3 & 4 are on the merits of the case on levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereafter referred as “the Act”). During the appeal hearing, the ld. AR mainly stressed his arguments on ground Nos.3 & 4 and relied on ground Nos. 1 & 2.

The brief facts of the case are that the assessee filed the return of income declaring total income of Rs. 2,54,440/- on 29.09.2008. The case was taken up for scrutiny and the assessment was completed u/s. 143(3) of the Act by an order dated 30.11.2010 on total income of Rs. 9,17,914/-. During the course of assessment, the Assessing Officer (AO) made the addition of Rs. 6,63,504/- representing the difference in ledger balances and initiated penalty proceedings u/s. 271(1)(c) of the Act. Subsequently, the AO completed the penalty proceedings by an order dated 28.03.2018 and levied the penalty of Rs. 1,99,050/- representing the addition made in respect of ledger balances. Against the assessment order, the assessee went on appeal and the issue travelled to the ITAT. The Hon’ble ITAT in its order dated 08.06.2018 in deleted the addition made by the AO and allowed the appeal of the assessee.

Against the order of the AO imposing the penalty u/s 271(1)(c) of the Act, the assessee preferred appeal and the Ld CIT(A) dismissed the appeal of the assessee and confirmed penalty levied by the AO. Hence, the assessee is in appeal before us.

We heard the rival submissions and perused the material placed on record. In the instant case, the addition made by the AO amounting to Rs. 6,63,504/- representing difference of ledger balances was deleted by the Co-ordinate Bench of ITAT and on the same issue, the AO levied the penalty. Since, the impugned addition made by the AO was deleted, the penalty order becomes infructuous, hence, we set aside the order of the ld. CIT(A) and allow the appeal of this assessee.

Since we have cancelled the penalty on merits, we consider it is not necessary to adjudicate ground Nos.1 & 2.

In the result, appeal filed by the assessee is allowed.