The Delhi High Court, while quashing the appeal of the revenue held that penalty cannot be imposed where concealment of income has not been proven.
The assessing officer had passed the assessment under Section 153A read with Section 143(3) of the Act, which was challenged by the respondent-assessee before the appellate authorities and ultimately an appeal being was filed before this Court wherein, vide order dated 18th July, 2017, the appeal of the assessee was admitted for assessment year 2004-05.
The assessing officer had initiated penalty proceedings against the respondent-assessee under Section 271(1)(c) of the Act and issued notices dated 30th December, 2006 under Section 274 read with Section 271(1)(c) of the Act for the respective assessment years. Initially, the proceedings were kept in abeyance in view of the pendency of appeals before the CIT(A).
After the appeals were disposed of, a show-cause notice was issued to the respondent-assessee. After considering the reply to the notice, the Assessing Officer levied the penalties for relevant years.
The penalty order was challenged before the CIT(A), which confirmed the said order. Thereafter, it was challenged before the ITAT wherein the appeal of the assessee was allowed and the penalty amount was deleted vide the impugned order.
Mr. Deepak Anand, standing counsel for the appellant authority stated that the ITAT has erred in deleting the penalty without appreciating the fact that the additions made by the assessing officer had been confirmed by both the CIT(A) and ITAT.
He emphasizes that levy of penalty is the normal consequence in a case of concealed income and merely because this Court has admitted the appeal filed by the respondent-assessee against the ITAT order, the said fact cannot absolve the respondent-assessee from levy of penalty.
The division bench of Justice Manmohan and Justice Sanjeev Narula noted that levy of penalty cannot be a matter of course, as sought to be contended by the Revenue. It can only be levied in cases where the concealment of income has been proven. If the quantum order itself has been challenged and this Court has framed substantial questions of law in the appeal preferred by the respondent-assessee, it shows that the alleged concealment is not final and the issue is disputable.
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