RANJEET BEDI,MUMBAI vs. ITO 11(1)(3), MUMBAI

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ITA 5037/MUM/2015Status: DisposedITAT Mumbai28 June 2016AY 2002-035 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 held that since the quantum addition was deleted, the penalty levied under Section 271(1)(c) cannot survive. The penalty cannot stand without the underlying addition.

What were the facts?

The assessee is in appeal against an order confirming an addition of Rs. 48.17 lakhs as unexplained investments. The Tribunal had previously deleted this quantum addition. The current appeal concerns the penalty levied under Section 271(1)(c) based on this addition.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained when the primary addition on which it was based has been deleted. The applicability of Section 69 for investments recorded in books of account.

Which sections of the Income-tax Act were involved?

Section 69,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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

Before: Shri Joginder Singh, & Shri Ashwani Taneja

For Appellant: Shri Suresh Mukatam, Shri Shrikant Namdev-DR
Hearing: 28/06/2016

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 28/07/2015 of the Ld. First Appellate Authority, Mumbai.

2.

During hearing of this appeal, the ld. counsel for the assessee, Shri Suresh Mukatam contended that the quantum addition was deleted by the Tribunal vide order dated 07/03/2016 (ITA No.5423/Mum/2011). The ld. counsel for the assessee also produced the photocopy of the order. This factual matrix was not controverted by the ld. DR, Shri Shrikant Namdev.

1.

2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order dated 07/03/2016 for ready reference and analysis:-

“This appeal filed by the assessee is directed against the order dated 25.5.2011 passed by learned CIT(A)-3, Mumbai and it relates to A.Y. 2002-03.

2. The solitary issue urged in this appeal is as to whether learned CIT(A) was justified in confirming the addition of Rs. 48.17 lakhs made by the Assessing Officer u/s. 69 of the Act as unexplained investments.

3.

We have heard the parties and perused the record. The assessee had carried out construction/development work in respect of two assets aggregating to Rs.48.17 lakhs and it was accounted for in the books of account. During the course of original assessment proceedings, the Assessing Officer called for the details relating to construction expenses/development expenses. Since the assessee did not furnish the same, the Assessing Officer assessed the aggregate amount of Rs. 48.17 lakhs as unexplained investments u/s. 69 of the Act. When the matter travelled to the ITAT, the Tribunal restored the matter to the file of the Assessing Officer. In the set aside proceedings also the Assessing Officer assessed the said amount as unexplained investments u/s. 69 of the Act and the same was confirmed by learned CIT(A). Aggrieved the assessee has filed this appeal before us.

4.

The impugned addition has been made u/s. 69 of the Act, which reads as under:- Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.

5.

A careful perusal of section 69 would show the said provision shall be attracted only if the assessee has made investment and the same was not recorded in the books of account maintained by him. In the instant case, the undisputed fact is that the assessee has recorded the impugned investment amount of Rs. 48.17 lakhs in the books of account and hence question of assessing the same u/s. 69 of the Act does not arise. Accordingly we are of the view that the order passed by the Assessing Officer was not in accordance with law. Accordingly we set aside the order of learned CIT(A) on this issue and direct the Assessing Officer to delete the impugned disallowance.

6.

In the result, appeal filed by the assessee is allowed.”

2.2. In the aforesaid order, on quantum addition, the Tribunal vide aforesaid order dated 07/03/2016 deleted the disallowance/addition on the basis of which penalty was initiated/confirmed. In view of this factual matrix, we are of the view that penalty imposed u/s 271(1)(c) will not survive. Our view find support from the decision in K.C. Builders vs ACIT (2004) 265 ITR 562 (SC) and the ratio laid down in CIT vs S.P. Viz, 176 ITR 76 (Patna). Even otherwise, when the quantum addition is deleted, there remains no basis at all for levying the penalty for concealment or furnishing inaccurate particulars. The penalty cannot stand on its legs when addition on the basis of which the penalty was imposed remains no more in existence, thus, the appeal of the assessee is allowed and the ld. Assessing Officer is directed to delete the penalty. Finally, the appeal of the assessee is allowed. This order was pronounced in the open court in the presence of Ld. representative from both sides at the conclusion of the hearing on 27/06/2016.

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