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2017 (1) TMI 1594 - HC - Income TaxPenalty u/s 271(1)(c) - certain amounts ought to have been deducted by virtue of Section 194J and non compliances of which, resulted in an adverse order and disallowance under Section 40(a)(i) - Held that - The present proceedings emanate out of the penalty imposed by the AO. The CIT(A) took note of the same in the intervening period as well as of the judgment of the Supreme Court in K. C. Builders v. ACIT 2004 (1) TMI 7 - SUPREME COURT and deleted the penalty. The ITAT has confirmed that order. As is evident from the factual narrative, the primary question of disallowance itself was debatable in appeal to the ITAT the assessee was successful. In the circumstances, the deletion of the penalty by the CIT(A) and the ITAT cannot be called unreasonable, justifying interference by this Court. Therefore, no substantial question of law arises.
Issues involved:
1. Justification of direction to delete penalty under Section 260A of the Income Tax Act, 1961. Analysis: The High Court addressed the issue raised by the Revenue regarding the justification of deleting the penalty in the given circumstances. The Revenue contended that certain amounts should have been deducted under Section 194J, leading to disallowance under Section 40(a)(i) of the Income Tax Act. Subsequently, penalty proceedings were initiated based on this disallowance. The CIT(A) granted relief, which was confirmed by the ITAT. The Revenue's appeal against the deletion of disallowance was pending before the Court. The Court noted the debatable nature of the primary disallowance issue, as the assessee was successful in the appeal to the ITAT. Consequently, the Court found no substantial question of law justifying interference and dismissed the appeal. The Court further discussed the penalty imposed by the Assessing Officer (AO) and the subsequent actions taken by the CIT(A) and the ITAT. The CIT(A) considered the penalty and referred to the judgment of the Supreme Court in K. C. Builders v. ACIT [2004] 265 ITR 562 (SC) before deciding to delete the penalty. The ITAT upheld this decision. Given the debatable nature of the primary disallowance issue and the success of the assessee in the appeal to the ITAT, the Court found the deletion of the penalty by the CIT(A) and the ITAT to be reasonable. Consequently, the Court concluded that no substantial question of law arose in this matter, leading to the dismissal of the appeal.
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