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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN
O R D E R Per N. K. Pradhan, A. M.:
This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1, Mumbai and arises out of penalty u/s 271(1) (c ) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal
filed by the assessee read as under:
1. The Ld. Commissioner of Income Tax (Appeals) has erred in confirming the order of the Assessing Officer levying penalty u/s 271(1)(c) of the Income Tax Act aggregating to Rs.10,00,000/- for concealing income by way of filing inaccurate particulars.
2. The Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that the denial of the exemption to the appellant was only on account of a difference in interpretation of the various provisions of law and that the appellant’s explanation was bonafide, fully substantiated and not found to be false. The penalty therefore could not have been levied.
3. The Ld. Commissioner of Income Tax (Appeals) erred in not appreciating that the penalty is on account of possible infraction of law, due to the conduct of two of the Trustees which is not authorized by the Trust. The Trust itself and the other trustees should not suffer or be visited with penal consequences on account of acts of other trustees. The penalty should be levied and recovered from those trustees who have infringed the law. 4. The Ld. Commissioner of Income Tax (Appeals) erred in not appreciating that appellant has taken every step possible to stop the possible infraction of law by some of the trustees. 5. In the alternative and without prejudice to the above, Ld. Commissioner of Income Tax (Appeals) erred in upholding the penalty to the extent of Rs.10,00,000/- which is in excess of the minimum penalty envisaged by law.”
Briefly stated, the facts are that the assessee-trust filed its return of income for the AY 2009-10 on 30.03.2011 declaring ‘Nil’ income after claiming exemption u/s 11 of the Act. The Assessing Officer (AO) passed an order u/s 143(3) of the Act on 26.12.2011 assessing the income at Rs.15,64,624/- after denying exemption u/s 11 to the assessee. The AO then imposed the penalty of Rs.10,00,000/- u/s 271(1)(c) of the Act. The assessee-trust then filed an appeal before the ld. CIT(A) against the penalty of Rs.10,00,000/- imposed by the AO. The ld. CIT(A) has dismissed the appeal filed by the assessee-trust. The assessee-trust is in appeal before us against the above order passed by the ld. CIT(A).
We have heard the rival submissions and perused the relevant material available on record. We find that the assessment order passed by the AO which later on was the subject matter of appeal before the ld. CIT(A) for impugned assessment year has been set aside by the ITAT ‘B’ Bench Mumbai in the case of the assessee i.e. Balmohan Vidyamandir Trust, Mumbai vs. ITO(Exemption) in dated 11.05.2016. As the assessment order passed by the AO has been set aside by the ITAT, the penalty proceeding initiated in respect of such proceedings cannot survive. We may refer to the decision in the case of K.C.Builders vs. Asst.CIT (2004) 265 ITR 562,569 (SC) wherein it has been held that 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 by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled.
In view of the foregoing reasons, the order of the Ld. CIT(A) confirming the imposition of penalty of Rs.10,00,000/- by the AO is hereby cancelled.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on November, 18th 2016