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Facts
The assessee appealed against the CIT(A)'s order which confirmed a penalty of Rs. 81,59,580 levied by the AO under Section 271(1)(c) of the Income Tax Act for AY 2014-15. The assessee challenged the validity of the penalty notice under Section 274 read with Section 271(1)(c) and argued that the underlying quantum additions/disallowances, forming the basis of the penalty, had already been set aside by the ITAT and remanded to the AO for fresh consideration.
Held
The Tribunal noted that since the very basis for the penalty (the quantum additions/disallowances) had been set aside and remanded by a Co-ordinate Bench, the foundation for imposing the penalty no longer survived. Consequently, the Tribunal set aside the CIT(A)'s order sustaining the penalty and restored the matter back to the Assessing Officer for fresh adjudication, contingent upon the final outcome of the quantum assessment.
Key Issues
Whether a penalty under Section 271(1)(c) can be sustained when the underlying quantum additions/disallowances have been set aside and remanded for fresh adjudication, and the validity of the penalty notice under Section 274 for not specifying the charge.
Sections Cited
Section 250 of the Income Tax Act, 1961, Section 271(1)(c) of the Income Tax Act, 1961, Section 274 of the Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI PRADIP KUMAR KEDIA & SHRI PRADIP KUMAR KEDIA & SHRI PRADIP KUMAR KEDIA & SHRI VIMAL KUMARSHRI VIMAL KUMAR
The captioned appeal has been filed at the instance of captioned appeal has been filed at the instance of the assessee against the order of the Ld. Commissioner of Income Tax (A), National Faceless against the order of the Ld. Commissioner of Income Tax (A), National Faceless against the order of the Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre, Delhi [“Ld.CIT(A)”] Appeal Centre, Delhi [“Ld.CIT(A)”] dated 16.01.2024 passed u/s 250 of the dated 16.01.2024 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arisi Income Tax Act, 1961 [“the Act”] arising in the penalty order dated 31.03.2019 order dated 31.03.2019 passed by the Assessing Officer (“AO”) u/s 271(1)(c) of the Act concerning passed by the Assessing Officer (“AO”) u/s 271(1)(c) of the Act concerning passed by the Assessing Officer (“AO”) u/s 271(1)(c) of the Act concerning assessment year 2014-15.
The grounds of appeal raised by the assessee read as under: The grounds of appeal raised by the assessee read as under:- The grounds of appeal raised by the assessee read as under:
1. “That the Hon'ble CIT(A) has erred in law a “That the Hon'ble CIT(A) has erred in law and on facts in not nd on facts in not disposing off the additional ground of appeal raised by the Appellant disposing off the additional ground of appeal raised by the Appellant disposing off the additional ground of appeal raised by the Appellant challenging the validity and legality of the notice dated 27.12.2016 challenging the validity and legality of the notice dated 27.12.2016 challenging the validity and legality of the notice dated 27.12.2016 issued u/s 274 r.w.s. 271(1)(c) of the Act, inter alia because issued u/s 274 r.w.s. 271(1)(c) of the Act, inter alia because – issued u/s 274 r.w.s. 271(1)(c) of the Act, inter alia because No.1133/Del/2024 1.1. The notice initiating the p The notice initiating the penalty proceedings did not mention enalty proceedings did not mention the specific charge against the Appellant as to whether the Ld. the specific charge against the Appellant as to whether the Ld. the specific charge against the Appellant as to whether the Ld. AO considered it a case of concealment of income or furnishing AO considered it a case of concealment of income or furnishing AO considered it a case of concealment of income or furnishing inaccurate particulars of income. inaccurate particulars of income. 1.2. The Hon'ble The Hon'ble CIT(A) ought to have quashed the notice dated CIT(A) ought to have quashed the notice dated 27.12.2016 at the very threshold by following the judgment of 27.12.2016 at the very threshold by following the judgment of 27.12.2016 at the very threshold by following the judgment of the Hon'ble Jurisdictional Delhi High Court in the case of the Hon'ble Jurisdictional Delhi High Court in the case of the Hon'ble Jurisdictional Delhi High Court in the case of Sahara India Life Insurance Company Limited. Sahara India Life Insurance Company Limited.
2. That the Hon'ble CIT(A) has erred on fa That the Hon'ble CIT(A) has erred on facts and in law in confirming cts and in law in confirming the penalty of Rs. 81,59,580 as levied u/s 271(1)(c) of the Act the penalty of Rs. 81,59,580 as levied u/s 271(1)(c) of the Act the penalty of Rs. 81,59,580 as levied u/s 271(1)(c) of the Act without appreciating that the addition on which penalty has been without appreciating that the addition on which penalty has been without appreciating that the addition on which penalty has been upheld has been upheld has been-disposed off by the Hon'ble Income Tax Appellate disposed off by the Hon'ble Income Tax Appellate Tribunal, and the issue has been Tribunal, and the issue has been remanded back to the remanded back to the file of the Assessing Officer fo Assessing Officer for fresh consideration.”
At the time of hearing, no one attended the proceedings on behalf of the At the time of hearing, no one attended the proceedings on behalf of the At the time of hearing, no one attended the proceedings on behalf of the assessee. Under these facts, the appeal of the assessee is taken up for hearing Under these facts, the appeal of the assessee is taken up for hearing Under these facts, the appeal of the assessee is taken up for hearing in the absence of the assessee and is being decided on the basis of material assessee and is being decided on the basis of material assessee and is being decided on the basis of material available on record.
When the matter was called for hearing, When the matter was called for hearing, it transpired that the quantum additions/disallowance giving rise to the additions/disallowance giving rise to the imposition of penalty in appeal has of penalty in appeal has been set aside by the Co set aside by the Co-ordinate Bench of the Tribunal Tribunal in for the Assessment Year 2014 No.6999/Del/2017 for the Assessment Year 2014-15, order dated 30.06.2022 15, order dated 30.06.2022 in the quantum proceedings to the file of the AO. in the quantum proceedings to the file of the AO.
In view of the fact that the quantum additions/ In view of the fact that the quantum additions/disallowances disallowances itself have been set aside having regard to the appellate order of the ITAT in quantum been set aside having regard to the appellate order of the ITAT in quantum been set aside having regard to the appellate order of the ITAT in quantum No.1133/Del/2024 proceedings, the very basis for imposition of penalty u/s 271(1)(c) of the Act proceedings, the very basis for imposition of penalty u/s 271(1)(c) of the Act proceedings, the very basis for imposition of penalty u/s 271(1)(c) of the Act does not survive at present. does not survive at present. Therefore, the action of the Ld.CIT(A) towards , the action of the Ld.CIT(A) towards sustaining penalty is set aside aside and restored back to the file of the AO for fresh and restored back to the file of the AO for fresh adjudication in the light of quantum assessment. of quantum assessment.
In the result, the appeal of the assessee is allowed for statistical In the result, the appeal of the assessee is allowed for statistical In the result, the appeal of the assessee is allowed for statistical purposes.