DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL)-1, BHOPAL vs. DILIP BUILDCON LIMITED, BHOPAL

Heard the learned Representatives of both sides and case records perused.

Briefly stated the facts are such that the assessment of assessee was completed u/s 143(3) of the Act, after making certain additions. The assessee challenged those additions to Ld. CIT(A) and thereafter matter travelled upto ITAT, with the result that all additions have been deleted. Ld. DR informed that the revenue has filed appeal to Hon'ble High Court of M.P. against the order of ITAT and the appeal is pending as of now for adjudication by Hon’ble High Court. During intervening period, the Ld. AO passed penalty-order on 22.10.2020 imposing a penalty of Rs. 14,66,90,000/- u/s 271(1)(c) on the basis of additions made by Ld. AO, as modified by Ld. CIT(A).

Against aforesaid penalty-order, the assessee filed appeal to Ld. CIT(A), which came to be decided by Ld. CIT(A) vide order dated 18.05.2022, wherein the Ld. CIT(A) deleted penalty by holding as under:

Being aggrieved by order of Ld. CIT(A), the revenue is now in appeal before us. The sole grievance of revenue is that since the revenue’s quantum-appeals against the order of I.T.A.T. is pending before Hon'ble

Before us, Ld. DR emphasized the grievance of revenue. Per contra, Ld. AR submitted that the impugned penalty u/s 271(1)(c) was based on the additions made by Ld. AO and since those additions stood deleted fully, the Ld. CIT(A) was legally justified in granting relief to the assessee. Ld. AR submitted that there is no infirmity in the order of Ld. CIT(A) for the reason that the penalty u/s 271(1)(c) is dependent upon the sustenance of the additions and since the additions themselves have been deleted, the penalty cannot survive.

We have considered submissions of both sides. We observe that the Ld. CIT(A) has given relief because the entire additions stood deleted. On a careful reading of section 271(1)(c), we observe that the levy of penalty as well calculation-formula of the penalty contemplated in that section is linked with the additions. If the additions themselves do not subsist, neither the levy of the penalty have legs to stand nor the calculation of amount of penalty. Due to this position of law, we do not find any merit in the submission of revenue that the penalty must survive, during the pendency of revenue’s quantum-appeal before Hon’ble High Court. Therefore, we are in agreement with the conclusion made by Ld. CIT(A). In this view of matter, we do not find any infirmity or fallacy in the order of Ld. CIT(A). Hence, we uphold the same and dismiss this appeal of revenue which is devoid of any merit.

Before parting, we make it clear that in a case the revenue succeeds in its pending appeal before Hon’ble High Court, then the AO shall be at liberty and entitled to re-initiate penalty proceedings as per relevant provisions of the act and the rules made thereunder in accordance with the outcome of the judgement of Hon’ble High Court.

In the result, this appeal of revenue is dismissed.