VOITH PAPER GMBH & CO. KG (NOW MERGED WITH J.M. VOITH SE & CO. KG),NEW DELHI vs. DCIT, INT. TAXATION,CIRCLE-2(1)(2), NEW DELHI

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.