2021 (4) TMI 858 - AT - Income Tax

Penalty proceedings under section 271(1)(c) - Claim of exemption of capital gains as per the provisions of section 54G - HELD THAT - In view of the confirmation of deletion of quantum addition by the Hon'ble High Court 2019 (7) TMI 1046 - MADRAS HIGH COURT , we are of the considered opinion that the penalty levied under section 271(1)(c) of the Act cannot survive and accordingly, the appellate order passed by the ld. CIT(A) stands sustained. Thus, the ground raised by the Revenue stands dismissed.

Summary

Issues:
1. Delay in filing the appeal by the Revenue.
2. Penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
3. Interpretation of the term 'industrial undertaking' for claiming deduction under section 54G of the Act.
4. Validity of the penalty in light of the Tribunal and High Court decisions.

Issue 1: Delay in filing the appeal by the Revenue

The appeal filed by the Revenue was delayed by 3 days, and a petition for condonation of the delay was submitted. The delay was condoned as the Revenue demonstrated sufficient cause, and the appeal was admitted for adjudication.

Issue 2: Penalty levied under section 271(1)(c) of the Income Tax Act, 1961

The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act due to discrepancies in income assessment. Despite the assessee's submissions, the penalty of ?11,41,32,333 was imposed. However, the ld. CIT(A) later held that the penalty was not sustainable as the quantum addition was deleted by the ITAT in a previous order.

Issue 3: Interpretation of the term 'industrial undertaking' for claiming deduction under section 54G of the Act

The assessee claimed a deduction under section 54G of the Act, which was initially disallowed by the Assessing Officer. The ITAT later ruled in favor of the assessee, allowing the exemption of capital gains. The Tribunal considered the business activities of the assessee and the definition of 'industrial undertaking,' concluding that the assessee was entitled to the deduction.

Issue 4: Validity of the penalty in light of the Tribunal and High Court decisions

The Revenue appealed against the deletion of the penalty under section 271(1)(c) of the Act. The Hon'ble Madras High Court confirmed the ITAT's decision, emphasizing the definition of 'manufacture' under the Explosives Act, which supported the assessee's claim. The Tribunal upheld its decision, stating that the interpretation given to the facts of the case was legal and valid. Consequently, the penalty levied by the Assessing Officer could not stand, and the appeal by the Revenue was dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decision to delete the penalty levied under section 271(1)(c) of the Income Tax Act. The judgment highlighted the importance of correctly interpreting terms like 'industrial undertaking' and 'manufacture' in tax assessments to ensure fair application of tax laws.