2022 (10) TMI 1164 - HC - Income Tax

Penalty levied u/s 271(1)(c) - defective notice u/s 274 - Whether as order of assessment, which was subject matter of challenge before this Court at the instance of the revenue was dismissed by judgment would automatically result in setting aside the order of penalty imposed on the assessee? - HELD THAT - This issue was considered and answered by the Hon ble Supreme Court in the case of K.C. Builders Anr. vs. Assistant Commissioner of Income Tax 2004 (1) TMI 7 - SUPREME COURT wherein the Hon ble Supreme Court held that where additions made in the assessment order on the basis of which penalty for concealment was levied are deleted there remains no basis at all for levying the penalty for concealment and therefore in such a case no penalty can survive and the same is liable to be cancelled. The additions made in the assessment order have not been set aside and the order having been confirmed by this Court 2022 (7) TMI 1395 - CALCUTTA HIGH COURT penalty proceedings cannot survive. That apart the Hon ble Supreme Court had examined the factual position and found that the notice issued under section 274 of the Act was defective and in this regard also noted the decision in the case of CIT vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and allowed the assessee s appeal and dismissed the revenue s appeal.

Summary

Issues involved:
1. Delay in filing the appeal.
2. Consideration of substantial questions of law.
3. Cancellation of penalty under section 271(1)(c) of the Income Tax Act.
4. Validity of notices under section 274 of the Income Tax Act.

Analysis:
1. Delay in filing the appeal:
The High Court noted a delay of 1132 days in filing the appeal without a proper explanation from the revenue. Despite this, the court exercised discretion to consider whether substantial questions of law arose for consideration and thus condoned the delay in filing the appeal.

2. Consideration of substantial questions of law:
The appeal under Section 260A of the Income Tax Act was directed against an order passed by the Income Tax Appellate Tribunal. The revenue raised two substantial questions of law for consideration, related to the cancellation of penalty under section 271(1)(c) and the validity of notices under section 274 of the Income Tax Act.

3. Cancellation of penalty under section 271(1)(c) of the Income Tax Act:
The High Court confirmed the order passed by the Tribunal, citing a previous judgment where it was established that if additions made in the assessment order, on which penalty for concealment was levied, are deleted, then there is no basis for the penalty. As the additions were not set aside and the order was confirmed, the penalty proceedings could not survive. The court also noted the defective notice issued under section 274 of the Act, following the decision in a previous case, and dismissed the revenue's appeal.

4. Validity of notices under section 274 of the Income Tax Act:
The High Court found that there were no substantial questions of law arising for consideration in the appeal. Therefore, the appeal was dismissed along with the stay application.

In conclusion, the High Court dismissed the appeal filed by the revenue, citing the lack of substantial questions of law and the precedents established in previous judgments regarding the cancellation of penalty and the validity of notices under the Income Tax Act.