Tribunal cancels penalty under Income Tax Act, deeming it unwarranted due to unlawful assessment reopening.

The Tribunal allowed the appeal of the assessee, canceling the penalty imposed under section 271(1)(c) of the Income Tax Act. The Tribunal held that since the additions forming the basis of the penalty were nullified due to the unlawful reopening of the assessment, the penalty itself was unsustainable. Consequently, the penalty was deemed unwarranted, and the Tribunal overturned the orders of the Revenue authorities, annulling the penalty of Rs. 2,82,4323 imposed on the appellant.

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Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act.

The appellant contested the penalty imposed by the ld.CIT(A), revolving around the issue of confirming a penalty of Rs. 2,82,4323 under section 271(1)(c) of the Act. The appellant argued that the penalty was based on additions made by the AO, which were subsequently deleted due to the quashing of the assessment order by the Tribunal. The Tribunal held that the reopening of the assessment was unlawful, leading to the annulment of the re-assessment proceedings. The appellant contended that since the additions forming the basis of the penalty were nullified, the penalty itself was unsustainable. The Tribunal concurred, citing section 271(1)(c) which links the penalty amount to the tax sought to be evaded by the concealment of income. As the grounds for penalty imposition were extinguished by the Tribunal's decision, the penalty was deemed unwarranted. Consequently, the Tribunal canceled the penalty and overturned the orders of the Revenue authorities issued under section 271(1)(c) of the Act. The appeal of the assessee was allowed, with the pronouncement made on 22nd March 2019.

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