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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
PER C.M.Garg, J.M. This appeal by the revenue has been filed against the order of the Commissioner of Income Tax (Appeals)-III, New Delhi dated 20.03.2014 passed in first appeal no. 52/2013-14. The grounds raised
by the revenue read as follows : 1. “On the facts and in the circumstances of the case, the CIT(A) has erred in cancelling the penalty of Rs. 3,11,51,836/- levied by the AO under section 271(1)(c) of the Act.
2. The order of the CIT(A) is erroneous and is not tenable on facts and in law.”
2. We have heard argument of both the sides and carefully perused the relevant material placed on the record of the tribunal, 2 Shri Ram Hari Ram & Sons Pvt. Ltd. inter alia, penalty order, first appellate order and order of the ITAT dated 6.2.2013 in the quantum appeal, which deleted the addition on which penalty was levied. The Ld. Sr. DR supporting the penalty order submitted that in response to the show cause notice dated 4.3.2013 the assessee did not furnish any reply till passing of penalty order. Therefore, the AO was right in presuming that the assessee does not have any reply to furnish and any new material or facts to put on record to show that penalty is not leviable against him u/s 271(1)(c) of the Income Tax Act, 1961 (for short the Act). The Ld. DR further submitted that the assessee made surrender on account of unaccounted stock, during the course of search, which tantamount to concealment of income by furnishing inaccurate particulars of income. Therefore, he contended that the AO was right in imposing penalty on the assessee. The ld. DR vehemently contended that the CIT(A) has granted relief to the assessee without any basis, therefore, first appellate order may kindly be set aside by restoring that of the AO. However, on being asked from the bench, the Ld. Sr. DR could not controvert this fact that the ITAT, New Delhi by order dated 06.02.2013 (Supra) has deleted entire addition on which the AO had levied impugned penalty.
The ld. Counsel of the assessee strongly supported the first appellate order and submitted that when the addition, on the strength of which penalty was levied on the assessee, has been deleted by the ITAT order (supra), then penalty cannot be held a sustainable and the CIT(A) was right in deleting the same.
3 Shri Ram Hari Ram & Sons Pvt. Ltd.
On careful consideration of rival submissions and from perusal of the findings of the CIT(A), we observe that the CIT(A) has granted relieve to the assessee by holding as follows :
“I have gone through the appellant's submission, facts and evidences available on record. It is seen that penalty which is the subject matter of the present appeal was levied due to certain additions which were made by the AO vide his assessment order dated 21.12.2010 under Section 143(3) of the Act. Since this order under Section 143(3) was challenged in an appeal under Section 253 before the ITAT, New Delhi and vide order dated 06.02.2013, the Hon'ble Tribunal have already deleted the additions of Rs. 4,57,56,000 on which the AO has levied the penalty, thus there is no cause of action now, which calls for the imposition of penalty. Accordingly, the penalty levied by the AO cannot be sustained. In coming to above conclusion, I carry the strength from the decision of Hon'ble Supreme Court in the matter of K.C. Builders v. Asstt. CIT [2004] 265 ITR 562, wherein it was held that: "Where the additions mode in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled" However, subsequently if the additions are confirmed by the higher authorities than in that event the AO will be free to decide the issue of levying penalty under section 271(l)(c). As regards, the penalty on the addition of Rs.69,000 made under section 4 Shri Ram Hari Ram & Sons Pvt. Ltd. 40A(3) since the said addition falls in the "realm of law", therefore, in my humble view, no penalty under section 271(l)(c) is leviable because the same is not on account of incorrect facts or failure on account of inaccurate particular.
In view of above, when the tribunal has deleted the impugned additions then, the penalty, which was levied on the strength of such deleted additions, cannot be held as sustainable, and hence, we hold that the CIT(A) was correct in cancelling the penalty. Therefore, we are unable to see any valid reason to interfere with the impugned first appellate order of the CIT(A) and thus, we uphold the same. Accordingly ground no. 1 and 2 of the revenue being devoid of merits are dismissed.
In the result, appeal of the revenue is dismissed. Order Pronounced in the Court on 09/06/2017.