ASST CIT 16(2), MUMBAI vs. K.S AIYAR & CO, MUMBAI

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ITA 4961/MUM/2015Status: DisposedITAT Mumbai22 July 2016AY 2009-103 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the penalty. This was because the addition made by the Assessing Officer, which formed the basis for the penalty, had itself been deleted by a prior Tribunal order.

What were the facts?

The Assessing Officer disallowed a deduction claimed by the assessee, a firm of Chartered Accountants, for payments made to the legal heir of a deceased partner. Subsequently, a penalty under section 271(1)(c) was levied. The CIT(A) deleted this penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained when the underlying addition has been deleted. The impact of a prior Tribunal decision on the validity of the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI

Before: SHRI G.S.PANNU& SHRI AMARJIT SINGH.

For Appellant: Shri A.K.Kardam
For Respondent: Shri Ravikant Pathak
Hearing: 19/07/2016Pronounced: 22/07/2016

PER G.S.PANNU, A.M: ORDER

1.

The captioned appeal filed by the Revenue pertaining to assessment year 2009-10 is directed against an order passed by CIT(A)- 5, Mumbai dated 10/07/2015 which in turn arises out of an order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) dated 27/03/2014.

2.

In this appeal, the Revenue has raised the following Grounds of appeal:-

1. "On the facts and circumstances of the case and in law, the Learned CIT(A) has erred in deleting penalty levied under section 271 (1) (c) of the Income Tax Act amounting to Rs. 13,00,000/-.

2. On the facts and circumstances of the case the order of the Ld. CIT (A) is perverse in as much as the CIT (A) has not taken into consideration the fact that substantial question of law on the issue of disallowances in respect of which penalty was levied is pending before the High Court.

3. The appellant prays that the order of CIT (A) on the above ground be set aside and that of the Assessing officer be restored.”

3. Briefly put, the relevant facts are that the respondent assessee is a partnership firm of Chartered Accountants. In the assessment finalized under section 143(3) of the Act dated 9/12/2011, the Assessing Officer had made an addition of Rs.38,69,908/- to the returned income. The said amount represented payment made to Legal Heir of deceased partner, which was claimed as deductible while computing the total taxable income. The Assessing Officer, by following his stand for the earlier assessment years, disallowed the deduction. Subsequently, the Assessing Officer also levied penalty under section 271(1)(c) of the Act with respect to tax sought to be evaded on such income, and such penalty amounted to Rs.13.00 lacs. The penalty imposed has since been deleted by the CIT(A), primarily on the ground that the Tribunal in assessee’s case for the instant assessment year vide dated 28/03/2014 has deleted the disallowance itself. Against such a decision of the CIT(A), Revenue is in appeal before the Tribunal.

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