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2018 (6) TMI 694 - AT - Income TaxLevy of penalty u/s 271(1)(c) - addition made on account of disallowances out of expenses - Held that - As decided in assesee s own case 2017 (12) TMI 566 - ITAT DELHI this issue has been set aside to the file of the ld. CIT(A) to be decided afresh by providing an opportunity of being heard to the assessee. - Since, the penalty sustained u/s 271(1)(c) of the Act is directly related to the addition sustained by the ld. CIT(A) out of the expenses, the said issue has been set aside to the file of the ld. CIT(A). Therefore, the present issue relating to the levy of penalty u/s 271(1)(c) of the Act is also restored to the file of the ld. CIT(A) to be adjudicated after considering the outcome of the appeals on quantum. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. 2. Assessment of income under Section 115JB of the Income Tax Act. 3. Disallowance of expenses and its impact on penalty imposition. 4. Procedural fairness and natural justice in penalty proceedings. Issue 1: Confirmation of Penalty Levied under Section 271(1)(c) of the Income Tax Act, 1961 The main issue in these appeals is the confirmation of penalty levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The AO imposed the penalty due to the addition sustained by the Commissioner of Income Tax (Appeals) [CIT(A)] out of expenses amounting to ?33,68,196/-, leading to a penalty of ?11,33,740/-. The CIT(A) partially upheld the penalty, sustaining it at ?3,02,187/- for unpaid service tax, while canceling the penalty on other disallowances. Issue 2: Assessment of Income under Section 115JB of the Income Tax Act The assessee argued that since their income was assessed under Section 115JB, the penalty under Section 271(1)(c) could not be levied for disallowances made under normal provisions. They cited the Delhi High Court judgment in M/s Nalwa Sons Investment Ltd. and a CBDT Circular supporting their stance. The CIT(A) rejected this argument, stating that inaccurate particulars of income could still attract penalty, even if the final tax was levied on book profit under Section 115JB. Issue 3: Disallowance of Expenses and its Impact on Penalty Imposition The CIT(A) differentiated between expenses disallowed on an estimate basis and those disallowed due to incorrect claims. For estimated disallowances, the CIT(A) accepted that they do not invite penalty, referencing the Supreme Court judgment in Reliance Petroproducts (P) Ltd. However, for specific disallowed expenses, such as unpaid service tax, the CIT(A) upheld the penalty, noting that the assessee failed to add back the unpaid amount, thus filing inaccurate particulars of income. Issue 4: Procedural Fairness and Natural Justice in Penalty Proceedings The assessee contended that the AO did not properly consider their submissions and did not provide a fair opportunity for hearing, violating principles of natural justice. The CIT(A) addressed this by examining the facts and legal arguments, ultimately sustaining the penalty for unpaid service tax while canceling it for other disallowances. Conclusion and Remand for Fresh Adjudication The Income Tax Appellate Tribunal (ITAT) noted that the penalty was linked to the disallowances of expenses, which were subject to appeal. Since the quantum appeal was remanded to the CIT(A) for fresh adjudication, the ITAT also restored the penalty issue to the CIT(A) to be decided after the quantum appeal's outcome. The CIT(A) was directed to consider the Delhi High Court judgment and the CBDT Circular while adjudicating the penalty issue. Outcome The appeals were allowed for statistical purposes, and the matter was remanded to the CIT(A) for fresh adjudication in light of the quantum appeal's outcome and relevant legal precedents.
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