IN INCOME TAX APPELLATE TRIBUNAL, DELHI F BENCH, NEW DELHI BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, ITA No. 2028/DEL/2017 [Assessment Year 2010-11] DCIT, Circle-20(1), Room No. 219, 2nd Power Plant Engineers Ltd., 28, Najafgarh Floor, C.R. Building, I.P. Estate, New Delhi Road, New Delhi PAN-AADCP3971H Appellant Respondent Appellant by Sh. C.P. Singh, Addl. CIT Respondent by Sh. V.K. Tulsian, FCA Date of Hearing 27/08/2019 Date of Pronouncement 27/08/2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, With this appeal, Revenue has challenged correctness of ld. CIT(A)-7, New Delhi. 2. Thus solitary ground of Revenue read as under On facts and under circumstances of case, ld. CIT(A) has erred in law in deleting penalty of Rs. 1,18,72,790/- levied under section 271(1)(c) when disallowance made u/s 40(a)(ia) was also sustained by ld. CIT(A). 3. roots for levy of penalty lie in assessment order dated nil framed under section 143(3) of Act. While scrutinizing return of income, AO found 2 ITA No.2028/Del/2017 that assessee company has paid to M/s Jindal Power Limited in lieu of debit notes raised by M/s Jindal Power Limited with respect to salary expense and travelling expenses. AO was of opinion that payments to M/s Jindal Power Limited for carrying out work of supplying their personnel and bearing their travelling expenditure while they were engaged for assessee company amounted to contractual payments for rendering certain services of assessee company. 4. Accordingly, show cause notice was issued to assessee to explain as to why payments could not be held liable to be subjected to provisions of Section 194C of Act. 5. In its reply, assessee stated that actual cost to company M/s Jindal Power Limited has been reimbursed to that company and that company has duly deducted tax at source while making payments to concerned employees therefore, provisions of Section 193(C) of Act did not apply. 6. submissions did not find any favour with AO who was firm belief that payments made to Jindal Power Limited are covered within meaning of any work as envisaged within provisions of Section 194(C) of Act. AO disallowed Rs. 3,49,30,243/- under section 40(a)(ia) of Act. 7. quarrel travelled up to Tribunal and Tribunal in ITA No. 634/Del/2014 vide order dated 4.10.2017 remitted matter back to file of AO. relevant part of order of Tribunal read as under:- 22. Therefore in view of above decision of Hon'ble Delhi High Court we do not have any difficulty in accepting argument of Ld. authorized representative that if tax has been paid by recipient of income on 3 ITA No.2028/Del/2017 income in holding transactions and no disallowance should be made in hands of assessee. In view of this we set aside this issue back to file of Ld. assessing officer to allow benefit of 2nd proviso to section 40 (ia) of income tax act and if assessee is able to satisfy Ld. assessing officer that recipient of income has offered income in its return of income on furnishing section 139 of income tax , incorporated such income in its return of income , has paid due tax thereon and he furnishes requisite certificate as prescribed therein that no disallowance be made. Therefore, if assessee would like to have benefit of this particular proviso by furnishing requisite certificate is mentioned in provisions of section 201 of income tax act, appellant may furnish to ld AO same within 60 days of order and Ld. assessing officer may consider claim of assessee in accordance with law. In view of this ground No. 5 of appeal of assessee is accepted and allowed. 8. Pursuant to directions of Tribunal AO while giving effect in his order framed under section 143(3) read with section 254 of Act deleted entire additions made in first round of litigation and accepted returned income. 9. In light of aforesaid stated facts, once foundation has been removed, superstructure must fall. Since basis for levy of penalty i.e. disallowances made in assessment order has been removed, penalty so levied deserves to be deleted. Therefore, we decline to interfere with findings of ld. CIT(A). Appeal filed by Revenue is dismissed. 10. In result, appeal by Revenue is dismissed. order is pronounced in open court on 27/08/2019. Sd/- Sd/- [SUSHMA CHOWLA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 27/08/2019. SH 4 ITA No.2028/Del/2017 Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Date of dictation 27/08/2019 Date on which typed draft is placed before 27/08/2019 dictating Member Date on which typed draft is placed before Other Member Date on which approved draft comes to Sr.PS/PS Date on which fair order is placed before Dictating Member for pronouncement Date on which fair order comes back to Sr.PS/PS Date on which final order is uploaded on 29/08/2019 website of ITAT Date on which file goes to Bench Clerk Date on which file goes to Head Clerk date on which file goes to Assistant Registrar for signature on order Date of dispatch of Order DCIT, Circle-20(1), New Delhi v. Power Plant Engineers Ltd