DCIT, NEW DELHI vs. M/S AMSERVE CONSULTANTS LTD., NEW DELHI

Since the issue involved is common in both the appeals which were heard together so these are being disposed off by & 116/Del/2016 2 Amserve Consultants Ltd. Amsure Insurance Agency Ltd. this consolidated order for the sake of convenience and brevity.

In both these appeals, the common issue raised by the department relates to the deletion of penalty levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act).

During the course of hearing, the ld. Counsel for the assessee at the very outset sated that the additions on the basis of which the impugned penalties were levied by the AO had been deleted by the ITAT Delhi Bench ‘A’, New Delhi in the cases of assessees i.e. in & 6090/Del/2013 in the case of M/s Amserve Consultants Ltd. Vs ADIT, Circle-2(1), International Taxation, New Delhi and M/s Amsure Insurance Agency Ltd. Vs ADIT, Circle-2(1), International Taxation, New Delhi respectively. A reference was made to page nos. 124 to 146 of the assessee’s paper book.

In his rival submissions the ld. DR although supported the orders of the AO but could not controvert the aforesaid contention of the ld. Counsel for the assessee.

After considering the submissions of both the parties and the material available on record, it is noticed that the AO made the additions on account of excess/unreasonable payments of data processing charges to the assessee’s associate concern, by invoking the provisions of & 116/Del/2016 3 Amserve Consultants Ltd. Amsure Insurance Agency Ltd. Section 40A(2)(b) of the Act. The addition made by the AO was confirmed by the ld. CIT(A) and accordingly, the AO levied the penalty u/s 271(1)(c) of the Act on the basis of additions of Rs.4,88,97,289/- and Rs.4,80,82,255/- in the hands of M/s Amserve Consultants Ltd. and Amsure Insurance Agency Ltd. respectively. However, the ld. CIT(A) deleted the impugned penalties by following the decision of the ITAT Delhi Bench in ITA No. 2444/Del/2011 in the case of Sutradhar Pvt. Ltd.

Now the department is in appeal. 8. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is not in dispute that the additions on the basis of which the impugned penalties were levied by the AO is not inexistence, since the ITAT Bench ‘A’, New Delhi vide order dated 29.06.2016, deleted the additions made by the AO u/s 40A(2)(b) of the Act. The relevant findings have been given in para 16 of the order dated 29.06.2016 in ITA Nos. 6059 & 6090/Del/2013 for the assessment year 2009-10 which read as under: “16. In view of the above discussion we allow the appeals of the assessees in both the cases by deleting the disallowance made u/s 40A(2)(b) of the Act for the reason that the assessee has proved that the price paid is at arm’s length and not excessive or unreasonable and as the disallowance made on ad-hoc basis is arbitrary. There is no evasion of tax also warranting invocation of S. 40A(1) of the Act. & 116/Del/2016 4 Amserve Consultants Ltd. Amsure Insurance Agency Ltd. Hence we delete the disallowance in both the cases to the extent confirmed by the Ld. CIT(A).” 9. On a similar issue the Hon’ble Supreme Court in the case of K. C. Builders & Others Vs ACIT (2004) 265 ITR 562 held as under:

Where the additions made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment and, therefore, in such a case no penalty can survive and the penalty is liable to be cancelled. Ordinarily, penalty cannot stand if the assessment itself is set aside.

In view of the above, we do not see any valid ground to interfere with the impugned orders passed by the ld. CIT(A). Accordingly, we do not see any merit in these appeals of the department.

In the result, the appeals of the department are dismissed. (Order Pronounced in the Court on 28/09/2017)