KUONI TRAVEL (I) P. LTD,MUMBAI vs. DCIT RG 3(2),

Brief facts are, for the assessment year under consideration, the assessee filed its return of income on 28th October 2002 declaring total income of ` 12,13,39,305. Assessment in case of the assessee was completed under section 143(3) of the Act on 17th March 2005, determining the total income at ` 16,42,76,830. The difference between the income returned by the assessee and income determined by the Assessing Officer was due to addition of non–compete fee of ` 1 crore and license fee of ` 1.05 crore. Being aggrieved of such additions, the assessee filed appeal before the first appellate authority.

The learned Commissioner (Appeals) while deciding the appeal of the assessee reduced the addition made on account of non–compete fee to ` 75 lakh, whereas, he sustained the addition made on account of license fee. Against the aforesaid order of the learned Commissioner (Appeals) assessee preferred appeal before the Tribunal. In the meanwhile, on the basis of additions sustained by the learned Commissioner (Appeals), the Assessing Officer passed an order under section 271(1)(c) of the Act imposing penalty of ` 50 lakh. Though, the assessee challenged imposition of penalty before the learned Commissioner (Appeals), however, it was unsuccessful.

At the outset, the learned Authorised Representative submitted that both the additions on the basis of which penalty under section 271(1)(c) of the Act was imposed have been deleted by the Tribunal while deciding assessee’s appeal against such additions. Thus, he submitted, when the additions have been deleted the penalty imposed cannot survive.

The learned Departmental Representative agreed that the Tribunal has deleted the additions.

We have considered rival submissions and perused materials on record. Undisputedly, the impugned penalty under section 271(1)(c) of the Act was imposed by the Assessing Officer on the basis of additions sustained by the learned Commissioner (Appeals) on account of disallowance of non–compete fee and license fee paid by the assessee. However, while deciding assessee’s appeal against the aforesaid additions in ITA no.1924/Mum./2007, dated 19th January 2018, the Tribunal has deleted both the additions. When the additions on the basis of which penalty under section 271(1)(c) of the Act was imposed have been deleted, the penalty imposed under section 271(1)(c) of the Act cannot survive. Accordingly, we delete the penalty imposed of ` 50 lakh under section 271(1)(c) of the Act. Grounds raised are allowed.

In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 23.08.2018