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Facts
The assessee filed its return of income for AY 2015-16, processed u/s 143(1). The AO subsequently reopened the assessment u/s 148 and made an addition u/s 69 in an ex-parte order. This ex-parte assessment was set aside by the CIT(A) u/s 251(1) 1st Proviso, leading the AO to pass a fresh assessment order where the returned income was accepted without any additions. Consequently, the CIT(A) deleted the penalty originally imposed by the AO u/s 271(1)(c).
Held
The Tribunal upheld the CIT(A)'s deletion of the penalty, stating that a penalty under Section 271(1)(c) is computed on additions made to the total income. Since the fresh assessment order made no additions to the returned income, there was no legal basis to sustain the penalty against the assessee. The appeal filed by the Revenue was therefore dismissed.
Key Issues
Whether a penalty under Section 271(1)(c) is sustainable when the original assessment order, which contained additions, was set aside, and a fresh assessment order was passed accepting the returned income without making any additions.
Sections Cited
271(1)(c), 143(1), 148, 69, 251(1) 1st Proviso
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
HYBRID HEARING O R D E R PER RAJPAL YADAV, VP The Revenue is in appeal against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 25.02.2025 passed for assessment year 2015-16. 2. The solitary grievance of the Revenue is that ld.CIT (Appeals) has erred in deleting the penalty of A.Y.2015-16 2 Rs.1,01,62,590/- which was imposed by the AO u/s 271(1)(c) of the Income Tax Act.
The brief facts of the case are that assessee has filed its return of income on 30.09.2015 declaring total income at Rs.8,90,880/-. This return was processed u/s 143(1) and returned income was accepted. The AO, thereafter, reopened the assessment by issuance of a notice u/s 148 of the Income Tax Act on 31.03.2021. The AO in an ex-parte order dated 26.03.2022 made an addition of Rs.2,90,07,882/- u/s 69 of the Income Tax Act. This ex-parte assessment order was set aside by the ld.CIT (Appeals) on 11.11.2022 u/s 251(1) 1st Proviso. The ld. AO has passed the fresh assessment order on 31.01.2026 and accepted the returned income filed by the assessee.
Since ld.CIT (Appeals) has set aside the assessment order and restored it to the file of AO for re-determination of the income of the assessee, therefore, ld.CIT (Appeals) has deleted the penalty. A.Y.2015-16 3
Before us, it has been brought to our notice that AO did not make any addition to the returned income of the assessee, therefore, no penalty is sustainable over the assessee.
With the assistance of ld. Representative, we have gone through the record carefully. A perusal of Section 271(1)(c)(iii) of the Act would indicate that penalty is to be computed on the additions made to the total income of the assessee. In other words, if some addition is being made to the declared income of an assessee, only then penalty could be computed. In the present case, no addition has been made after the fresh assessment order and therefore, there is no foundation to visit the assessee with the penalty. The ld.CIT (Appeals) has rightly deleted the penalty. No interference is called for. Accordingly, this appeal is dismissed.
In the result, appeal of the Revenue is dismissed.