ITAT Chandigarh: Penalties under Income-tax Act Section 271(1)(c) deleted for assessee. Additions deleted = no penalties.

The Appellate Tribunal ITAT Chandigarh ruled in favor of the assessee, deleting penalties under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal held that since the additions forming the basis of the penalties had been deleted in a previous order, no penalty could be levied. The judgment emphasized that when the additions are deleted, there is no basis for imposing penalties. Consequently, the penalties were deemed unsustainable, leading to the dismissal of the Department's appeals and the allowance of the assessee's appeals.

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Issues:
Deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on additions deleted by ITAT.

Analysis:
The judgment by Appellate Tribunal ITAT Chandigarh involved two appeals by the Department against the common order of CIT(A), Panchkula, regarding the deletion of penalties under section 271(1)(c) of the Income-tax Act, 1961. The appeals were disposed of together due to the common issue. The counsel for the assessee pointed out that the additions forming the basis of the penalties had been deleted by ITAT in a previous order. The CIT(A) also deleted the penalties for the same reason. The Senior DR supported the lower authorities' orders but did not contest the factual position presented by the assessee's counsel.

The CIT(A) deleted the impugned penalties by observing that since the quantum additions had been deleted by ITAT in the appellant's own case for the assessment years 2005-06 & 2006-07, the penalties had no basis to stand. It is established that no penalty under section 271(1)(c) can be levied when the additions forming the basis of the penalty have been directed to be deleted. The Tribunal, in line with this principle, deleted the additions on which the Assessing officer had levied the penalties. Citing the case of K. C. Builders & Others Vs ACIT, the judgment emphasized that if the additions forming the basis of the penalty are deleted, there is no basis for levying the penalty, and it should be cancelled. In this case, since the additions were deleted, the impugned penalties were not sustainable, justifying the CIT(A)'s decision to delete them.

The judgment concluded that the impugned penalties were not leviable as the additions on which they were based had been deleted. Therefore, the appeals of the Department were found to be without merit, and the appeals of the assessee were allowed. The order was pronounced in court on 24/04/2019.

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