Penalty under section 271B set aside where foundational turnover addition deleted, rendering consequential penalty invalid and removed

Application of the legal maxim Sublato fundamento cadit opus is invoked to assert that where the foundational factual finding (addition to turnover) is deleted, all consequential proceedings predicated on that finding, including imposition of a penalty under tax law, must also fail; the penalty lacks independent sustenance once the underlying assessment is quashed, resulting in deletion of the penalty. The analysis treats the illegality of the foundational assessment as striking at the root of subsequent punitive action, thereby negating downstream enforcement measures and leading to allowance of the taxpayer's challenge.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 imposed on the assessee should be deleted where the quantum addition on which the penalty was founded has been deleted by the Tribunal.

Analysis: The penalty was imposed by the Assessing Officer as a percentage of the gross turnover based on an addition upheld in assessment proceedings. The Tribunal in a separate order deleted the quantum addition which formed the basis for levying the penalty. With the foundational addition removed, there is no remaining basis to sustain the consequential penalty. The maxim "Sublato fundamento cadit opus" (foundation removed, structure falls) was applied to indicate that illegality in the foundational assessment undermines subsequent consequential proceedings.

Conclusion: Penalty under section 271B of the Income-tax Act, 1961 deleted; appeal allowed in favour of the assessee.

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