Penalty under section 271(1)(c) cannot survive once the underlying quantum addition is set aside for fresh assessment.

Penalty under section 271(1)(c) could not survive because it was founded on a quantum addition that had already been set aside and restored to the Assessing Officer for fresh consideration. Once the basis of the penalty no longer subsisted, the Revenue could not sustain the levy at that stage, and the penalty was deleted. The Assessing Officer was, however, left free to consider initiation of penalty proceedings again after the fresh assessment, in accordance with law.

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Issues: Whether the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 could survive when the quantum assessment on which it was based had been set aside and restored to the Assessing Officer for fresh consideration.

Analysis: The penalty was founded on the original quantum addition. Since the Tribunal had already restored the quantum matter to the Assessing Officer for a fresh decision, the basis for the penalty no longer subsisted. The Revenue did not dispute these facts. In such circumstances, the penalty could not be sustained at that stage, though the Assessing Officer was left free to consider initiation of penalty proceedings after fresh assessment in accordance with law.

Conclusion: The penalty was unsustainable and was deleted, resulting in relief to the assessee.

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