Tax penalty overturned due to deletion of quantum addition forming basis. Appellate Tribunal rules in favor of assessee.

The penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2008-09 was challenged in this case. The Tribunal ruled in favor of the assessee, holding that since the quantum addition forming the basis of the penalty had been deleted and finalized, the penalty of Rs. 6,09,970/- could not be upheld. The lower authorities' orders were reversed, directing the Assessing Officer to delete the penalty imposed. The appeal of the assessee was allowed by the Appellate Tribunal ITAT DELHI.

---

---

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2008-09.

Analysis:
The appeal was filed against the order confirming the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The assessee challenged the penalty amounting to Rs. 6,09,970/- imposed for additions made on account of bogus purchases. The grounds of appeal included contentions regarding the legality and factual basis of the penalty.

The facts revealed that the assessee's return of income was initially filed at Rs. 1,56,005/-, but later, after a reassessment, an addition of Rs. 19,74,026/- was made on account of bogus purchases, resulting in a total income of Rs. 21,30,031/-. Subsequently, penalty proceedings were initiated for furnishing inaccurate particulars of income. The original addition, forming the basis of the penalty, was challenged and ultimately quashed by the SMC Bench based on a previous case ruling.

Despite the deletion of the quantum addition by the Tribunal, the Assessing Officer levied a penalty of Rs. 6,09,970/-. The assessee contended that since the addition was deleted and finalized, the penalty could not be sustained. The arguments presented by both the ld. AR and ld. DR were considered, and it was noted that the cause for penalty imposition ceased to exist after the deletion of the quantum addition.

Upon careful consideration of the contentions and lower authorities' orders, it was concluded that since the quantum addition, the basis for the penalty, had been deleted and finalized, the penalty could not be upheld. Consequently, the orders of the lower authorities were reversed, and the Assessing Officer was directed to delete the penalty of Rs. 6,09,970/- levied under Section 271(1)(c) of the Act. As a result, the appeal of the assessee was allowed.

The judgment was pronounced on 03/02/2021 by the Appellate Tribunal ITAT DELHI, with Members Bhavnesh Saini and Prashant Maharishi presiding over the case. The legal representatives for the appellant and respondents were Umang Luthra, Adv., and Rajesh Kumar, Sr. DR, respectively.

---