Dy.CIT, Central Circle-1, Vadodara V. Legal heir of Late Shri Mihir Pratapray Panchal, Vadodara

ITA 236/AHD/2022

AI Insights

This case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals), Ahmedabad-12, which quashed a penalty order passed by the Assessing Officer for the assessment year 2013-14. The penalty was initially levied under section 271(1)(c) of the Income Tax Act, based on certain quantum additions. However, these additions were later set aside by the ITAT in a separate appeal concerning the same assessee, Late Shri Mihir Pratapray Panchal. The Department's appeal to the ITAT challenged the CIT(A)'s decision to quash the penalty, arguing that the CIT(A) had erred in not adjudicating on the merits and in not exercising his powers as per the provisions of the Act. The ITAT dismissed the Department's appeal, citing the lack of a valid basis for the penalty following the quashing of the quantum additions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131486 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-05-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 15-06-2022
• Other Referred Cases: CIT Vs. Kanpur Coal Syndicate, CIT v Shah Alloys, CIT v Atul Ltd., CIT v Babul Harivadan Parikh, CIT (Exemptions) v. Ahmedabad Urban Development Authority, Roy Durlabhji, CIT v. Shishpal, ITO v. Magic software Enterprises India (P.) Ltd., LRs Management v. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Transfer pricing
• Section: 69; 271(1)(c)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e Dy. CIT, Central Circle-1 Vadodara (Appellant) Vs Legal Heir of Late Shri Mihir Pratapray Panchal, 201 , Sthaptya Flat, 1 Vrind avan Society, Near Ellora Park, Veg Market, Race Course, Vadodara PAN: AB JP P7642M (Resp ondent) Asses see b y : M s. Apex a Shah, A. R. Revenue by : Shri M. Anand, Sr. D. R. Date of hearing : 02-05 -2 023 Date of pronouncement : 12-05 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax, CIT(A), Ahmedabad-12, in proceeding u/s. 250 vide order dated 22/12/2021 passed for the assessment year 2013-14. ITA No. 236/Ahd/2022 Assessment Year 2013-14 I.T.A No. 236/Ahd/2022 A.Y. 2013-14 Page No. Dy. CIT vs. Legal Heir of Late Shri Mihir Pratapray Panchal 2 2. The Department has raised the following grounds of appeal:- “(1) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in quashing the penalty order passed by the Assessing Officer by holding that the same is illegal and void ab initio ignoring the fact that the assessee was alive while initiating the penalty proceedings and the assessee himself has pleaded to keep the penalty proceedings in abeyance till the disposal of appeal on quantum additions. (2) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in quashing the penalty order on technical grounds and not adjudicating the appeal of the assessee on merits of the case. (3) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not exercising the powers conferred on him as per the provisions of Section 25 l(l)(c) r, w. Explanation below Section 251(2) of the Act and also not considering the decision of the Hon'ble Supreme Court in the case of C1T Vs. Kanpur Coal Syndicate(SC) 53 1TR 229 wherein it has been held that scope of power of the CIT(A) is coterminous with that of the Assessing Officer. (4) On the facts and in the circumstances of the cases and in law, the Ld.CIT(A) has erred in not appreciating the fact that as per the provisions of Sec. 159(1) & (3) of the Act, the legal representative shall be liable to pay any sum as the deceased person and that the legal representative shall, for the purposes of this Act, be deemed to be an assessee. (5) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred m holding that mistake crept in the order of the Assessing Officer was not curable within the meaning of Section 292B of the Act. (6) It is, therefore, prayed that the order the Ld. CIT(A)-4. Surat may be set aside and that of the AO may be restored to the above extent. I.T.A No. 236/Ahd/2022 A.Y. 2013-14 Page No. Dy. CIT vs. Legal Heir of Late Shri Mihir Pratapray Panchal 3 (7) The appellant craves leave to add, alter, amend and/or withdraw any round(s) of appeal either before or during the course of hearing of the appeal.” 3. At the outset, the counsel for the assessee submitted that the impugned appeal has been filed by the Department against the order u/s 271(1)(c) of the Act for the assessment year 2013-14. However, since the quantum order on the basis of which penalty has been levied has been set aside by ITAT Ahmedabad vide order dated 30-03-2022, accordingly, the penalty levied u/s 271(1)(c) of the Act is also liable to be deleted. Copy of order passed by ITAT has been placed on record before us. 4. We have heard the contentions of the assessee and perused the material on record. It would be useful to reproduce the relevant extracts of the order passed by ITAT Ahmedabad in the case of Mihir P Panchal in IT(SS) number 112/Ahd/2018 vide order dated 30-03-2022 for ready reference: “Coming to ITA No, 112/AHD/2018, an appeal by the assessee Shri Mihir P. Panchal 10. At the outset, we note that issue raised by the assessee in its ground of appeal is similar to the grounds raised in the case of Shri Rajesh Bafna in ITA NO. 110/Ahd/2018. Therefore, the findings given in ITA No. 110/AHD2018 shall also be applicable for the assessee in his appeal in ITA No. 112/And/2018. The appeal of the assessee Shri Rajesh Bafna has been decided by us vide paragraph No. 9 of this order in his favour. The learned AR and the DR also agreed that whatever will be the findings for the issue raised in ITA No. 110/Ahd/2018 shall also be applied for the issue raised by the I.T.A No. 236/Ahd/2022 A.Y. 2013-14 Page No. Dy. CIT vs. Legal Heir of Late Shri Mihir Pratapray Panchal 4 appellant. Hence, the grounds of appeal filed by the assessee is hereby allowed. 10.1 In the result appeal of the assessee is allowed.” 4.1 We observe that the ITAT Ahmedabad in assessee’s own has deleted the quantum additions in favour of the assessee. Accordingly, since the very basis/foundation on which penalty u/s 271(1)(c) of the Act had been levied on the assessee itself has been vacated, then consequentially penalty imposed u/s 271(1)(c) of the Act is also liable to be vacated. 4.2 In the case of CIT v Shah Alloys 35 taxmann.com 532 (Gujarat), the Gujarat High Court held that penalty need not be imposed when addition made, which was the basis for penalty, was set aside. In the case of CIT vAtul Ltd. 44 Taxmann.com 320 (Gujarat), the Gujarat High Court held where in course of appellate proceedings, revenue authorities admitted that quantum addition on account of transfer pricing difference which was basis for imposition of penalty had already been deleted, impugned penalty order based on said addition also deserved to be set aside. In the case of CIT v Babul Harivadan Parikh 37 Taxmann.com 52 (Gujarat), the Gujarat High Court held that where revenue authorities passed a penalty order on basis of addition made to assessee's income under section 69A, in view of fact that said addition had been deleted by Tribunal in quantum appeal, penalty order so passed by authorities below was also liable to be quashed. In the case of CIT (Exemptions) v. Ahmedabad Urban Development Authority 103 taxmann.com 82 (SC), the honourable Supreme Court held that where AO having rejected assessee claim for exemption under sections I.T.A No. 236/Ahd/2022 A.Y. 2013-14 Page No. Dy. CIT vs. Legal Heir of Late Shri Mihir Pratapray Panchal 5 11 and 12, passed a penalty order under section 271(1)(c) for raising a false claim, in view of fact that assessee succeeded in quantum appeal and, thus, High Court set aside penalty order as well, SLP filed against said decision was to be dismissed. In the case of Roy Durlabhji 211 ITR 470 (Rajasthan), the High Court held that where in quantum appeal, additions had already been deleted, no penalty under section 271(1)(c) could be levied. In the case of CIT v. Shishpal 126 Taxman 5 (Rajasthan), addition was made as unexplained investment under section 69 and penalty was imposed under section 271(1)(c).The aforesaid addition was deleted in quantum appeal. The High Court held that since the very foundation for imposition of penalty had become non-existent, penalty would not survive. In the case of ITO v. Magic software Enterprises India (P.) Ltd.101 taxmann.com 53 (Pune - Trib.) where AO passed penalty order under sec. 271(1)c) on basis of transfer pricing adjustment made by TPO, in view of fact that assumption of jurisdiction by TPO was held invalid by Tribunal and, as a result, quantum addition was also deleted, impugned penalty order had no legs to stand and, thus, same also deserved to be set aside. In the case of LRs Management v. DCIT 149 taxmann.com 32 (Rajkot - Trib.), it was held that where quantum addition made by AO was deleted by Tribunal, there remained no basis for levy of penalty under section 271(1)(c) of the Act. 4.3 In view of the facts of the instant case and the settled legal proposition on the subject that once the quantum proceedings itself have been decided in favour of the assessee, there is no scope of levy of penalty u/s 271(1)(c) of the Act, we are here by dismissing the appeal filed by the Department. I.T.A No. 236/Ahd/2022 A.Y. 2013-14 Page No. Dy. CIT vs. Legal Heir of Late Shri Mihir Pratapray Panchal 6 5. In the result, appeal of the Department is dismissed. Order pronounced in the open court on 12-05-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/05/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद