M.G. ASSOCIATES,MUMBAI vs. ITO 12(3)(2), MUMBAI

PDF · subscribers
ITA 1500/MUM/2015Status: DisposedITAT Mumbai31 October 2016AY 2006-073 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the addition made by the AO was subsequently deleted by a coordinate bench of the ITAT. Following the Supreme Court's decision in K.C. Builders, the Tribunal held that if the additions forming the basis of a penalty are deleted, the penalty cannot survive.

What were the facts?

The Assessing Officer made an addition of Rs. 35,79,224/- to the assessee's income on account of disputed purchases. Subsequently, a penalty of Rs. 10,95,242/- was imposed under Section 271(1)(c). The CIT(A) confirmed both the addition and the penalty.

What were the issues?

Whether a penalty under Section 271(1)(c) can be sustained when the additions on which it was based have been deleted.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN

For Appellant: Shri. Ninad Patade
For Respondent: Shri. J.P.Jangid
Hearing: 31/10/2016

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2006-07. The appeal is directed against the order of the Commissioner(Appeals)-28 at Mumbai and arises out of the penalty order u/s 271(1)(c) of the Income Tax Act, 1961 (here-in-after ‘the Act’).

2.

In a nutshell, the material facts are that during the course of assessment, the Assessing Officer (AO) was not convinced with the explanation given by the assessee with regard to purchases of cloth of Rs. 18,83,061/- from M/s Divya Fabrics and Rs. 16,96,163/- from M/s N.M.Corporation and thus made an addition of Rs.35,79,224/- to the total income of the assessee. Then the AO imposed a minimum penalty of Rs.10,95,242/- u/s 271(1)(c) on the above amount. The ld. CIT(A) confirmed the above penalty imposed by the AO. Thus the assessee is in appeal before us against the above order of the ld. CIT(A).

3.

We have heard the rival submission and perused the relevant material on record. We find that the above addition of Rs.35,79,224/- made by the AO has been deleted by the ITAT “B” Bench, Mumbai (ITA No. 4766/Mum/2011). We produce below the relevant portion of the said order.

“ We are of the considered view that the CIT(A) erred in confirming and sustaining the addition of Rs.35,79,224/- to the income of the assessee-firm on account of purchases made by the assessee-firm from M/s Divya Fabrics and M/s N M Corporation as made by the AO in the assessment order and we delete the additions of Rs.35,79,224/- made by the AO and as confirmed/sustained by the CIT(A) to the income of the assessee-firm. We order accordingly.”

4.

It has been held by the Hon’ble Supreme Court in K. C. Builders v. ACIT (2004) 265 ITR 562,569 (SC) that where the additions made 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.

5.

In view of the above, the penalty of Rs. 10,95,242/- confirmed by the ld. CIT(A) is cancelled.

6.

In the result, the appeal is allowed.

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →