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Facts
The assessee appealed against a penalty levied under Section 271(1)(c) of the Income Tax Act for Assessment Year 2015-16. This penalty was based on an addition of Rs. 16,72,21,072/- made by the AO regarding profit attribution to the assessee's Permanent Establishment (PE) from offshore supply. In the quantum proceedings, the Tribunal had restored the entire issue to the Assessing Officer for *de novo* adjudication, finding the departmental authorities' profit rate estimation to be conjectural.
Held
The Tribunal held that since the quantum proceedings resulted in the underlying addition being set aside for *de novo* adjudication, the substratum for the penalty under Section 271(1)(c) has eroded. Therefore, the penalty levied does not survive, and the impugned order upholding the penalty was set aside.
Key Issues
Whether a penalty under Section 271(1)(c) of the Income Tax Act can be sustained when the quantum addition, on which the penalty was based, has been restored to the Assessing Officer for fresh adjudication.
Sections Cited
Section 271(1)(c)
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Income Tax Appellate Tribunal, DELHI BENCH “D”, DELHI
(A.Y.2015-16) Voith Paper Gmbh & Co. KG, (Now merged with J.M Voith SE & Co. KG), C/o Mohinder Puri & Co. CAs 1A-D, Vandhna, 11 Tolstoy Marg, New Delhi 110001 PAN: AADCV-4876-D ...... अपीलाथ�/Appellant बनाम Vs. Deputy Commissioner of Income Tax, International Taxation, Circle -2(1)(2), ..... �ितवादी/Respondent New Delhi 110002 अपीलाथ� �ारा/ Appellant by : S/Shri Anuj Mathur, and Ankit Nanda, Chartered Accountant �ितवादी�ारा/Respondent by : Shri Vijay B Vasanta, CIT-DR सुनवाई क� ितिथ/ Date of hearing : 21/08/2024 घोषणा क� ितिथ/ Date of pronouncement : 21/08/2024 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax, (Appeal) Delhi-43 (hereinafter referred to as ‘the CIT(A)’) dated 27.03.2024, for Assessment Year 2015-16, upholding levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Shri Anuj Mathur, appearing on behalf of the assessee submitted at the outset that in quantum proceedings for AY 2015-16, the Tribunal in appeal by the assessee vide order dated 23.04.2024 has restored the issue to Assessing Officer (AO) for denovo adjudication. Since, in the quantum proceedings the Tribunal has set aside the assessment order, the penalty proceedings arising from said order will not survive. The ld. AR placed on record, order of the Tribunal in (supra).
Shri Vijay B Vasanta representing the department fairly stated that in quantum proceedings for AY 2015-16. The Tribunal has restored the issue back to the file of AO for denovo assessment.
We have heard the submissions made by rival sides and have examined the orders of authorities below. In the present appeal, the assessee has assailed levy of penalty u/s. 271(1) (c) of the Act. The assessee has placed on record order of the Tribunal in quantum proceedings for the impugned AY in the case of assessee. The co-ordinate Bench has restored the issues in appeal to the file of AO for denovo adjudication. A perusal of the assessment order reveals that AO has made addition of Rs. 16,72,21,072/- on account of profit from offshore supply of the assessee attributable to its PE. The AO while making addition also initiated penalty proceedings u/s. 271(1)(c) of the Act. In first appeal, the CIT(A) allowed part relief to the assessee. The profit attribution to the PE at the rate of 10% was reduced to 5% by the CIT(A). Still, aggrieved the assessee carried the issue in appeal before the Tribunal in (supra). The Tribunal held, that the reasoning given by Departmental Authorities in adopting estimated profit rate is based on conjectures and surmises, hence, rejected the estimations. The Tribunal restored the issue to AO for denovo adjudication. Since, substratum for levy of penalty has eroded, the penalty levied u/s. 271(1)(c) of the Act does not survive.