2018 (3) TMI 1739 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee had carried out activities of advancement of other general public utility provided under section 2(15) - According to the AO, it was not charitable activity and the assessee is not entitled for exemption under section 11(1)(a) - CIT-A deleted the penalty - HELD THAT - Sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable him, which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income and furnishing of inaccurate particulars of income. The quantification of the penalty is depended upon the addition made to the income of the assessee. Since basis for visiting the assessee with penalty has been extinguished by the decision of the Hon ble Gujarat High Court in the assessee s case 2017 (5) TMI 1468 - GUJARAT HIGH COURT wherein it has held that assessee is entitled for benefits under sections 11 and 12 of the Act, the impugned penalty has no limb to stand, accordingly we are of the view that the ld.CIT(A) has rightly deleted the penalty and there is no merit in this appeal of Revenue.

Summary

Issues:
Appeal against order of CIT(A) deleting penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The Revenue appealed to the Tribunal against the CIT(A)'s decision to delete a penalty of ?101,24,35,800 imposed by the AO under section 271(1)(c) for the Asstt.Year 2010-11. The AO had determined the assessee's taxable income at ?327,68,11,000, claiming that the activities carried out did not qualify as "charitable purpose" under section 2(15) of the Act, thus denying exemption under sections 11 and 12. However, the assessee contended that the Hon'ble Gujarat High Court had ruled in their favor, holding that they were entitled to benefits under sections 11 and 12, rendering the AO's addition invalid and the penalty unjustified.

The Tribunal noted that section 271(1)(c) allows for a penalty not less than, but not exceeding three times the tax sought to be evaded due to concealment or inaccurate particulars of income. As the basis for imposing the penalty was invalidated by the High Court's decision in favor of the assessee, confirming their eligibility for benefits under sections 11 and 12, the penalty had no grounds to stand. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, finding no merit in the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty by the CIT(A) based on the High Court's ruling in favor of the assessee's eligibility for benefits under sections 11 and 12.