Penalty Not Maintainable When Assessment Order No Longer Exists: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal(ITAT) ruled that the penalty imposed under section 271(1)(c) of Income Tax Act,1961 was not maintainable since the assessment order no longer existed.

Bharat Vanmalibhai Modiya,appellant-assessee,appealed against the order dated 24.04.2024 passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the assessment year 2010-11.The assessee requested condonation of delay in filing the appeal, supported by an affidavit. After considering the arguments and the principles from the Land Acquisition Collector Vs. Mst. Katiji & Ors. case, which favored substantial justice over technicalities in cases of non-deliberate delay, the delay was examined.

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Since the department did not file an affidavit to counter the assessee's claim, the facts in the affidavit went unchallenged. Based on these points, the delay in filing the appeal was condoned.

The assessee's counsel mentioned that the appeal was concerning the penalty imposed under section 271(1)(c) of the Act, while the main assessment order had already been quashed by the Coordinate Bench of the ITAT.

Section 271(1)(c) of the Act allows the tax department to impose a penalty on individuals who conceal their income or provide false information in their tax returns. The penalty can be between 100% and 300% of the tax that was avoided due to these actions. This section is designed to discourage tax evasion and promote accurate reporting in tax filings.

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The two member bench comprising Sandeep Gosain(Judicial Member) and Girish Agrawal(Accountant Member) after hearing both parties and reviewing the records, found that the assessment order for the year had been quashed by the Coordinate Bench of the ITAT. Since the assessment order was no longer valid, the penalty based on it also had to be quashed. As the assessment, which was the basis for the penalty, no longer existed, the penalty imposed by the Assessing Officer(AO) and upheld by the CIT(A) was quashed.

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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