Penalty cannot survive with respect to additions which have been deleted: ITAT

In this case ITAT noted that the addition on the basis of which the penalty was levied upon the assessee by the AO has ceased to exist. In other words, the quantum addition made by the AO has already been deleted by the ITAT as evident from the finding of the ITAT in ITA No.165/RJT/2018 vide paragraph No.8 of this order. Thus, the question of furnishing the inaccurate particulars of income does not arise and therefore the penalty cannot be sustained.

Under the provisions of section 271(1)(c) of the Act the amount of penalty has been specified which shall not be less than a hundred percent of the amount of tax sought to be evaded subject to the maximum limit of 300% of such amount. Under Explanation 4 to section 271(1)(c) of the Act, the manner for quantifying the amount of tax sought to be evaded has been specified which has direct nexus with the additions/ disallowances made during the quantum proceedings.

Therefore, where the quantum additions/disallowances have been deleted, then the manner of quantifying the amount of penalty under explanation 4 to section 271(1)(c) of the Act as discussed above fails. Accordingly, ITAT pronounced that there cannot be any penalty with respect to the quantum additions which have been deleted whether on merit or on technical grounds. Thus, we find no reason to uphold the order of the learned CIT-A and therefore the AO is directed to delete the penalty levied by him. Hence, the ground of appeal of the assessee is allowed.

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