PRAGATI FINSEC LTD.,NEW DELHI vs. ITO, WARD -20(1), NEW DELHI

The only grievance of the assessee in this appeal relates to the confirmation of penalty levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act) amounting to Rs.10,82,210/-.

During the course of hearing, the ld. Counsel for the assessee at the very outset stated that the AO made the addition of Rs.25,06,400/- on account of cash deposited in the bank account and Rs.5,25,000/- on account of accommodation entry received. It was further submitted that the ld. CIT(A) deleted the addition of Rs.5,25,000/- vide order dated 11.12.2017 and the remaining

Pragati Finsec Ltd. amount of Rs.25,06,400/- was deleted by the ITAT Bench ‘SMC’, New Delhi vide order dated 20.06.2018 in for the assessment year 2002-03 (copy of the said order was furnished which is placed on record).

In his rival submissions, the ld. Sr. DR although supported the impugned order passed by the ld. CIT(A) but could not controvert the aforesaid contention of the ld. Counsel for the assessee.

I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the addition on the basis of which the AO levied the penalty u/s 271(1)(c) of the Act has already been deleted by the ld. CIT(A)/ITAT. Therefore, the impugned penalty is not leviable u/s 271(1)(c) of the Act, when the addition has already been deleted.

On a similar issue, the Hon’ble Supreme Court in the case of K. C. Builders & Others Vs ACIT (2004) 265 ITR 562 has held as under: “Where the additions made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment and, therefore, in such a case no penalty can survive and the penalty is liable to be cancelled. Ordinarily, penalty cannot stand if the assessment itself is set aside.”

In view of the above, the penalty sustained by the ld. CIT(A) is deleted.

In the result, appeal of the assessee is allowed. (Order Pronounced in the Court on 03/10/2018)