ITO, NEW DELHI vs. M/S. ZOOM BRUSHES PVT. LTD., DELHI

At the outset, the ld. AR appearing on behalf of the assessee placed on record a copy of ITAT order in assessee’s case in ITA 3636/Del/2012 for assessment year 2009-10 and submitted that vide order dated 14.08.2014, the Coordinate Bench of the Tribunal has deleted quantum addition pertaining to deemed dividend u/s 2(22)(e) of the Act on which addition the impugned penalty had been imposed. The ld. AR submitted that in view of the quantum addition having been deleted by the Tribunal, the penalty will not survive any way.

Ld. Sr. DR placed reliance on the findings of the Assessing Officer but could not negate the fact that the quantum addition had been deleted by the ITAT.

We have heard the rival submissions and perused the material available on record. It is undisputed that the quantum appeal of the assessee was allowed by the Coordinate Bench of this Tribunal in ITA 3636/Del/2012 wherein vide order dated 14.8.2014, the quantum addition pertaining to deemed dividend u/s 2(22)(e) has been deleted. It is undisputed that the impugned penalty u/s 271(1)(c) of the Act was imposed on the deemed dividend u/s 2(22)(e) which has since been deleted by the Coordinate Bench of the ITAT. In such a situation, the penalty cannot survive in any case. We also note that the department would not have preferred an appeal against the quantum deleted by the ITAT as the tax involved was less than the monetary limit fixed by the CBDT for the department to file appeals before the Hon’ble High Court. In such a situation, we find no reason to interfere with the findings of the ld. Commissioner of Income Tax(A) and we dismiss the department’s appeal.