2026 (1) TMI 910 - AT - Income Tax

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 ... Penalty u/s 271B - scope of legal maxim “Sublato fundamento cadit opus” - Tribunal has deleted the quantum addition made by the AO - HELD THAT:- Once the foundation fails, the superstructure also fails i.e the addition also is to be deleted. In this regard, I place reliance on the legal maxim “Sublato fundamento cadit opus” (meaning thereby that foundation being removed, structure /work falls). Hence the initial action of the Revenue to impose penalty itself is not in consonance with law, as entire turnover of the assessee, for which addition was made by Assessing Officer has been deleted by the Tribunal, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the penalty order - Appeal filed by the assessee is allowed. 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.