2017 (3) TMI 1304 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - Since the very addition which is the basis for levy of penalty has been deleted by the Tribunal in the quantum appeal, therefore, the penalty does not survive. We, therefore, do not find any infirmity in the order of CIT(A) cancelling the penalty levied by the Assessing Officer u/s 271(1)(c) of the Income Tax Act. Accordingly, the order of the CIT(A) cancelling the penalty is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.

Summary

Issues:
Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act by the CIT(A) for A.Y. 2009-10.

Analysis:
The case involved a private limited company engaged in real estate, which revised its income tax return for A.Y. 2009-10. The Assessing Officer denied exemption claimed by the company on receipts from an AOP, treating it as business income. The CIT(A) upheld this decision, leading to penalty proceedings under section 271(1)(c) of the IT Act. The company argued that the issue was debatable and relied on a Tribunal decision in its favor for previous assessment years.

The CIT(A) canceled the penalty based on the Tribunal's previous favorable decision for the company. The Revenue appealed this decision. The ITAT Pune upheld the CIT(A)'s decision, citing the Tribunal's earlier order that the company's share from the AOP was indeed profit sharing, not a mere consideration. The Tribunal found no infirmity in the CIT(A)'s order, as the addition forming the basis for the penalty had been deleted in the quantum appeal, rendering the penalty unjustified.

The Tribunal emphasized that the company's profit sharing arrangement with the AOP was in line with the agreement and not a mere consideration for development rights. Relying on the Tribunal's previous decision, the ITAT Pune dismissed the Revenue's appeal, upholding the cancellation of the penalty under section 271(1)(c) of the IT Act for A.Y. 2009-10.