2021 (12) TMI 392 - AT - Income Tax

Appellate Tribunal invalidates penalty imposition after quantum appeal success, upholding natural justice principles.

ITO – 12 (3) (1), Mumbai Versus M/s. JAS Trading P. Ltd.

The Appellate Tribunal upheld the deletion of the penalty by the Commissioner of Income Tax (Appeals) based on the success of the quantum appeal in the ... Penalty u/s 271(1)(c) - assessee has failed to prove the genuineness of the transactions and the claims - CIT-A deleted the penalty - HELD THAT:- Since the quantum appeal is allowed by the Hon’ble Tribunal therefore the penalty will not sustained. We are of the opinion that the CIT(A) dealt on the facts and has relied on the decision of Hon’ble Tribunal and passed a reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal raised by the revenue Issues Involved:1. Appeal against deletion of penalty under sections 271(1)(c) and 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals).2. Consideration of penalty imposition without acceptance of the ITAT order and pending appeal before the High Court.3. Validity of penalty imposition by the Assessing Officer (AO) based on lack of genuineness in transactions.4. Applicability of penalty deletion by CIT(A) due to quantum appeal success in the Hon'ble Tribunal.5. Adherence to natural justice principles in penalty proceedings.Issue 1: Appeal against Deletion of Penalty:The revenue filed an appeal challenging the deletion of penalty under sections 271(1)(c) and 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals). The grounds of appeal raised questions regarding the erred deletion of penalty by the CIT(A) without considering the merits of the issue, solely relying on the ITAT's deletion of the quantum addition.Issue 2: Consideration of ITAT Order and Pending Appeal:The appeal raised concerns about the CIT(A) deleting the penalty without acknowledging the ITAT's decision and the pending appeal before the High Court. The revenue argued that the CIT(A) erred in not accepting the ITAT's order, which led to the penalty deletion.Issue 3: Validity of Penalty Imposition:The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act, citing the failure of the assessee to prove the genuineness of transactions and claims. Despite providing opportunities for explanations, the AO imposed the penalty based on findings in the scrutiny assessment.Issue 4: Quantum Appeal Success and Penalty Deletion:The CIT(A) deleted the penalty imposed by the AO, citing the success of the assessee's quantum appeal in the Hon'ble Tribunal. The CIT(A) relied on Supreme Court and High Court decisions, stating that since the additions leading to the penalty imposition were set aside by the Tribunal, the penalty under section 271(1)(c) did not stand.Issue 5: Adherence to Natural Justice Principles:During the hearing, arguments were presented regarding the adherence to natural justice principles in penalty proceedings. The CIT(A) based the penalty deletion on the decision of the Hon'ble Tribunal and passed a reasoned order, which was upheld by the Appellate Tribunal, dismissing the revenue's appeal.In conclusion, the Appellate Tribunal upheld the deletion of the penalty by the CIT(A) based on the success of the quantum appeal in the Hon'ble Tribunal, leading to the penalty imposition being deemed invalid. The decision was supported by the principles of natural justice and reasoned consideration of the facts, resulting in the dismissal of the revenue's appeal.