THE DCIT, CENTRAL CIRCLE-2, VADODARA vs. SHRI PRAVINCHANDRA RANCHHODBHAI PATEL, VADODARA

The only effective ground raised in this appeal is whether the ld. CIT(A) is justified in restricting the penalty levied u/s 271(1)(c) of the Act to Rs.51,34,112/- as against the penalty of Rs.1,49,38,880/- levied by the Assessing Officer on the grounds that the additions, which form the basis of the penalty, have been deleted by the ITAT without appreciating the facts that DCIT Vs. Pravinchandra Ranchhodbhai Patel AY : 2014-15 the Department has filed an appeal against the order of the ITAT before the Hon’ble Gujarat High Court and which is still pending.

The brief facts of the case are that return of income for the assessment year under consideration was filed by the assessee u/s. 139(1) of the Act on 12.06.2015 declaring total income at Rs. 27,80,341/-. A search action u/s 132 of the Act was conducted in Sigma Group of cases on 13.11.2014, which also included the case of the assessee by virtue of Section 153A of the Act. Accordingly, proceedings u/s. 153A of the Act was initiated and notice u/s 153A was issued on 20.07.2015. In response to which the assessee had filed return of income u/s. 153A on 27.08.2016 declaring total income of Rs.27,80,341/-. Thereafter, the assessment was finalized u/s 153A r.w.s. 143(3) of the Act on 30.12.2016 determining total assessed income of Rs.10,32,17,140/- after making various additions/disallowances, which included the addition of Rs. 4,48,600/- on account of agricultural income, Rs.4,00,84,234/- for credit entries from Bank Statements, Rs. 5,58,300/- for unexplained income, Rs. 2,51,180/- for unaccounted income and Rs.4,11,37,485/- on account of unexplained investments/loans.

Aggrieved by the assessment order, assessee preferred appeal before the ld. CIT(A) who, partly allowed the appeal of the assessee; however, confirmed the additions on account of agriculture income of Rs.4,00,000/-, credit entries in bank account of Rs.26,63,386/-, unexplained loan/investment amounting to Rs.3,67,37,485/- and unaccounted income of Rs.39,00,000/-. Subsequent to the ld. CIT(A)’s order confirming the aforesaid additions, penalty u/s 271(1)(c) of the Act was completed by the Assessing Officer vide his order dated 29.01.2021, levying a penalty of Rs.1,49,38,800/- being the DCIT Vs. Pravinchandra Ranchhodbhai Patel AY : 2014-15 amount equivalent to the 100% of the tax sought to be evaded by the assessee on the additions confirmed by the Ld.CIT(A) to the tune of Rs.4,37,00,871/-. On further appeal before the ld. CIT(A), the impugned penalty was restricted by him to Rs.51,34,112/- on the grounds that the additions amounting to Rs.3,67,37,485/-, which form the basis of the penalty, have been deleted by the Tribunal vide order dated 13.01.2022 in quantum proceedings.

We have heard both the parties and the material available on record. It is pertinent to observe that, the Ld.CIT(A) has deleted penalty levied on additions noted by him to have been deleted by the ITAT in its order passed in quantum proceedings. When the Tribunal has deleted the quantum addition, the penalty levied u/s 271(1)(c) of the Act corresponding to the said addition has no legs to stand on. As far as the Department’s appeal to the High Court challenging the deletion of the said addition is concerned, it is pertinent to note that the High Court has neither overturned the Tribunal’s order nor issued a stay order as of now. Accordingly, the Tribunal’s decision retains its legal validity, and presently no addition stands. We, therefore, uphold the order of the ld. CIT(A) deleting the impugned penalty levied u/s 271(1)(c) of the Act and dismiss the appeal filed by the Revenue.

In the result, the appeal of the Revenue is dismissed.