PARAMOUNT INDUSTRIAL SECURITIES PRIVATE LIMITED,FARIDABAD vs. INCOME TAX OFFICER WARD 19(3), DELHI

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ITA 3729/DEL/2023Status: DisposedITAT Delhi13 December 2024AY 2011-2012Bench: SHRI CHALLA NAGENDRA PRASAD (Judicial Member)4 pages

AI SummaryRemanded

Facts

The assessee's assessment for AY 2011-12 was completed under Section 144 read with Section 147, with an addition of Rs.8,47,824/- for undisclosed contractual receipts, on which the AO levied a penalty of Rs.2,61,977/- under Section 271(1)(c). Subsequently, the Ld.CIT(Appeals) restricted the quantum addition to Rs.1,27,374/-, and a consequential order was passed to this effect. However, the Ld.CIT(Appeals)-NFAC sustained the penalty on the entire original addition of Rs.8,47,824/-, based on an incorrect observation that the assessee had not appealed the quantum addition.

Held

The Tribunal observed that since the quantum addition, on which the penalty was based, had been substantially reduced by the Ld.CIT(A) and a consequential order was issued, the penalty sustained on the original higher amount could not be upheld. Therefore, the penalty order dated 28.06.2019 was set aside, and the issue of levy of penalty under Section 271(1)(c) was restored to the file of the AO for a fresh order, taking into account the reduced quantum addition and providing adequate opportunity to the assessee.

Key Issues

Whether the penalty levied under Section 271(1)(c) is sustainable when the quantum addition forming its basis has been substantially reduced by the appellate authority.

Sections Cited

271(1)(c) of the Income Tax Act, 1961, 144 of the Income Tax Act, 1961, 147 of the Income Tax Act, 1961

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “SMC” NEW DELHI

Before: SHRI CHALLA NAGENDRA PRASAD

Hearing: 04.12.2024

आदेश /O R D E R This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 20.10.2023 for the AY 2011-12 in sustaining the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961.

The Ld. Counsel for the assessee, at the outset, submits that the assessment in the case of the assessee was completed u/s 144 r.w.s. 147 of the Act on 09.12.2018 determining the income at Rs.8,47,824/- by making addition of Rs.8,47,824/- on account of undisclosed contractual receipts. The Assessing Officer (AO) passed penalty order dated 28.06.2019 levying penalty of Rs.2,61,977/- on the addition of Rs.8,47,824/- made in the quantum assessment. Ld.

Counsel submits that when the assessee appealed against the addition made towards undisclosed contractual receipts, the Ld.CIT(Appeals) by order dated 25.06.2024 restricted the addition to Rs.1,27,374/- as against Rs.8,47,824/- made in the assessment order. The Ld. Counsel submits that the Ld.CIT(Appeals)-NFAC sustained the penalty levied by the AO on the entire addition of Rs.8,47,824/- observing that the assessee did not file appeal in quantum addition which is factually incorrect. The Ld. Counsel invited the attention of the Bench to the consequential order dated 30.11.2024 passed by the AO giving effect to the order of the Ld.CIT(Appeals) in quantum proceedings, wherein the income was revised to Rs.1,27,374/- as against Rs.8,47,824/-. Therefore, the Ld. Counsel submits that there is no justification in sustaining the penalty of Rs.2,61,977/- u/s 271(1)(c) of the Act on the addition of Rs.8,47,824/- made in the assessment order.

Heard rival submissions, perused the orders of the authorities below. On perusal of the record before me it is observed that the Ld.CIT(Appeals)-NFAC sustained the penalty levied u/s 271(1)(c) of the Act on the entire addition of Rs.8,47,824/- when in fact the addition was restricted to Rs.1,27,374/- by the Ld.CIT(A) in quantum proceedings. Consequential order was also passed to that effect bringing down the addition to Rs.1,27,374/-. However, it is observed that the penalty was levied u/s 271(1)(c) of the Act on the addition of Rs.8,47,824/- when the addition was made in the quantum proceedings. Since the addition has been reduced substantially by the Ld.CIT(A) in quantum proceedings and also the consequential order was also passed by the AO, penalty cannot be sustained on the addition made in quantum proceedings. Thus, the order passed by the AO dated 28.06.2019 levying penalty of Rs.2,61,977/- u/s 271(1)(c) of the Act on the quantum addition of Rs.8,47,824/- is set aside. The issue of levy of penalty u/s 271(1)(c) of the Act is restored to the file of the AO to pass a fresh order in accordance with law after taking cognizance order passed by the Ld.CIT(A) in quantum proceedings and the consequential order dated 30.11.2024 passed giving effect to the order of the Ld.CIT(Appeals), in accordance with law after providing adequate opportunity to the assessee.