2012 (7) TMI 1087 - AT - Income Tax

Summary

Issues involved: Appeal against cancellation of penalty u/s 271(1)(c) on disallowance u/s 14A and u/s 94(7) of the Income-tax Act, 1961.

Issue 1 - Disallowance u/s 14A:
The assessment was completed u/s 143(3) of the Income-tax Act, 1961, disallowing an amount u/s 14A. Penalty proceedings u/s 271(1)(c) were initiated, and a penalty was imposed. The CIT(A) cancelled the penalty, citing relevant case laws. The ITAT set aside the additions, leading to the cancellation of the penalty as per legal precedents. The appeal against the CIT(A)'s decision was dismissed, and the AO was directed to re-adjudicate the matter.

Issue 2 - Disallowance u/s 94(7):
An amount was disallowed u/s 94(7) of the Act, and penalty proceedings u/s 271(1)(c) were initiated. The CIT(A) cancelled the penalty, and the ITAT's decision in the quantum appeal led to the cancellation of the penalty as the additions were set aside. Legal precedents were cited to support the decision. The appeal was dismissed, and the AO was directed to re-adjudicate the matter.

General Observations:
The appeal was dismissed as the additions forming the basis of the penalty were set aside by the ITAT, rendering the penalty unsustainable. The legal principles established by various court decisions were applied to support the cancellation of the penalty. No additional grounds were raised, and the appeal was ultimately dismissed.