This article provides an in-depth analysis of ITA No. 1435/DEL/2020, a case involving the Additional Commissioner of Income Tax (ACIT) Central Circle-14, New Delhi, and Kartikeya Buildcon Pvt Ltd of New Delhi. The case pertains to the assessment year 2008-09 and was filed on July 23, 2020. The final tribunal order was pronounced on September 13, 2023.
Kartikeya Buildcon Pvt Ltd, located at Room No. 266, 2nd Floor, Jhandewalan Extension, New Delhi, appealed against the penalty order for the assessment year 2008-09. The case was heard by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘C’, with Shri Pradip Kumar Kedia serving as the Accountant Member and Shri Yogesh Kumar U.S. as the Judicial Member. The appeal was related to the imposition of penalties under section 271(1)(c) of the Income Tax Act, 1961.
The appellant originally filed a return of income declaring a total income for the assessment year 2008-09. The case was selected for scrutiny, and the assessment was framed under section 143(3) of the Income Tax Act, resulting in several additions and the imposition of a substantial penalty.
The primary issue in this case was the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act for concealment of income or furnishing inaccurate particulars of income.
The appellant, represented by Mr. Waseem Arshad, argued that the penalty was justified based on the additions made during the assessment. However, the respondent, represented by Ms. Monika Agarwal, countered that the basis of the assessment, which gave rise to the addition, had been annulled by a Co-ordinate Bench of the Tribunal in ITA No. 1164/Del/2018 on February 8, 2023. The counsel for the respondent contended that without a valid assessment order, the penalty could not stand.
The respondent’s counsel, Ms. Monika Agarwal, emphasized that the annulment of the assessment order by the Tribunal rendered the penalty invalid. She argued that since the foundational assessment had been quashed, the penalty based on it could not be sustained.
The ITAT bench, after considering the arguments and perusing the records, found that the foundation for the penalty had ceased to exist due to the quashing of the quantum assessment order by the Co-ordinate Bench. The Tribunal noted that the penalty imposed was directly related to the additions made in the assessment order, which was no longer valid.
The Tribunal referred to the decision in ITA No. 1164/Del/2018, where the assessment order was annulled. Since the penalty was based on this annulled assessment, the Tribunal concluded that the penalty could not be sustained.
Given the invalidation of the assessment order, the Tribunal directed the deletion of the penalty imposed under section 271(1)(c). The Tribunal dismissed the Revenue’s appeal, thereby allowing the respondent’s contention.
The ITAT concluded that the penalties imposed by the AO and affirmed by the CIT(A) were not justified due to the invalid assessment orders. The Tribunal allowed the appeal of Kartikeya Buildcon Pvt Ltd and directed the deletion of the penalties.
This case underscores the importance of a valid assessment order as the foundation for imposing penalties under the Income Tax Act. It highlights the necessity of challenging penalties that are based on flawed or invalid assessments. The decision also reiterates the Tribunal’s role in ensuring the fair application of tax laws and penalties.
For taxpayers, this case serves as a reminder to meticulously scrutinize assessment orders and challenge any penalties that stem from invalid or legally flawed assessments. It emphasizes the importance of procedural compliance and the need for a clear basis when imposing penalties.
In conclusion, the decision in ITA No. 1435/DEL/2020 reaffirms the critical role of valid assessment orders in penalty proceedings and highlights the Tribunal’s commitment to upholding the integrity of the tax adjudication process.
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