Foundation for Levy of Penalty is on Addition made of Concealment of Income, No Penalty u/s 271(1)(c) imposable in the Absence of Addition: ITAT [Read Order]

Foundation for levy of penalty is on addition made of concealment of income, the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that no penalty u/s 271(1)(c) of the Income Tax Act,1961 imposable in the absence of addition.

Shri Anil Kumar Agrawal, FCA, appeared on behalf of the assessee and Shri Partha Pratim Barman appeared on behalf of the Revenue.

Swarnasathi Advisory Services Pvt. Limited, the assessee has filed its return of income on 31.03.2007 declaring a total income of Rs.4,528/- and an assessment order was passed under section 143(3) determining the taxable income of the assessee at Rs.48,230/-. The Assessing Officer, later on, received information from the DIT (Inv.)-II that the assessee has taken accommodation entries from Surendra Kumar Jain Group for an amount of Rs.1,25,000/-. An assessment order was passed under section 147 read with 143(3) on 25.03.2014 determining the total assessed income of Rs.1,73,230/-.

On appeal, the CIT(Appeals) held that the assessee had received share application money of Rs.18,00,000/- and issued a show-cause notice for enhancement of income and initiated penalty proceedings against the assessee under section 271(1)(c) of the Act.

Aggrieved with the order of  CIT(Appeals) dated 13.08.2018 by which an addition of Rs.18,00,000/- with the aid of section 68 was made, the assessee filed an appeal before the ITAT bearing ITA No. 1929/KOL/2018 which was allowed by the Tribunal vide its order dated 04.01.2019. It was stated that the Tribunal has deleted the addition of Rs.18,00,000/-.

A perusal of sub-clause (iii) of section 271(1)(c) would reveal that in the cases falling within the ambit of clause (c), the assessee would be directed to pay in addition to taxes any amount, which shall not be less than but which shall not exceed (three times) the amount of tax sought to be evaded.

A Coram of Shri Rajpal Yadav, Vice-President (KZ) & Shri Rajesh Kumar, Accountant Member observed that the moment additions are being deleted the computation of penalty would fail.

Since the additions have been deleted, the very foundation to visit the assessee with the penalty does not survive and while allowing the appeal of the assessee, the Tribunal deleted the penalty.

To Read the full text of the Order CLICK HERE

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