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2013 (10) TMI 467 - AT - Income TaxApplication of section 275(1A) of income tax for deleting penalty imposed u/s 271(1)(c) of the Income Tax Act concealment of income - additions made on account of transfer pricing adjustments was deleted by the ITAT - Held that - as per section 275(1A) where the Assessing Officer has passed penalty order before the disposal of appeal against the assessment order by the appellate authority i.e. CIT(A) or ITAT, then, the order imposing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the CIT(A) or the Appellate Tribunal or the High Court or the Supreme Court or the order of revision u/s 263 or u/s 264. ITAT having passed the order in appeal deleting all the additions excepting one, it is the requirement u/s 275(1A) that the Assessing Officer must pass an order giving effect to the order of the Tribunal and only thereafter consider the issue of imposition of penalty u/s 271(1)(c) - Set aside the order passed by the CIT(A) and restore the matter back to the file of the Assessing Officer, who shall consider the issue of imposition of penalty u/s 271(1)(c) of the Act after giving effect to the order of the Tribunal and after duly giving opportunity of being heard to the assessee in the matter.
Issues:
1. Disallowance of various expenses in the assessment year 2007-08. 2. Imposition of penalty u/s 271(1)(c) by the Assessing Officer. 3. Appeal against the penalty order before the CIT(A). 4. CIT(A)'s decision on the penalty imposition. 5. Appeal by the revenue against CIT(A)'s order. Analysis: Issue 1: Disallowance of Various Expenses The appeal was filed by the Revenue against the order passed by the CIT(A)-IV, Hyderabad regarding disallowances made during the assessment year 2007-08. The Assessing Officer referred the case to the TPO for determining the Arm's Length Price of the international transaction. The final assessment order included several disallowances and additions, which were challenged by the assessee before the ITAT. The ITAT deleted most of the additions, except for the disallowance of land cost attributable to the land sold by APHB on 500 LIG houses. The ITAT upheld this disallowance based on ownership and registration issues. Issue 2: Imposition of Penalty u/s 271(1)(c) The Assessing Officer initiated penalty proceedings u/s 271(1)(c) against the assessee while the appeal was pending before the ITAT. The assessee argued that since the appeal was pending, the penalty proceedings should be dropped. However, the Assessing Officer imposed a penalty of Rs. 20,86,60,998/- citing concealment of income. The assessee appealed against this penalty order before the CIT(A). Issue 3: Appeal Against Penalty Order The assessee challenged the penalty order before the CIT(A), arguing that there was no concealment of income or furnishing of inaccurate particulars. The CIT(A) considered the ITAT's decision to delete most additions and concluded that penalty on those deleted additions should also be dropped. Regarding the remaining disallowance sustained by the ITAT, the CIT(A) referred to the Supreme Court's decision and deleted the penalty imposed. Issue 4: CIT(A)'s Decision on Penalty Imposition The CIT(A) deleted the penalty in respect of additions deleted by the ITAT. For the remaining disallowance sustained by the ITAT, the CIT(A referred to the Supreme Court's decision and ruled in favor of the assessee, stating that the mere making of an inadmissible claim does not amount to furnishing inaccurate particulars. Therefore, the penalty was deleted for that specific disallowance. Issue 5: Appeal by the Revenue The Revenue appealed against the CIT(A)'s order, arguing that the penalty u/s 271(1)(c) should not have been equated with a wrong claim of deduction. They contended that the assessee consciously made a wrong computation of income. The ITAT set aside the CIT(A)'s order and instructed the Assessing Officer to reconsider the penalty imposition after giving effect to the ITAT's order and providing the assessee with a hearing opportunity. In conclusion, the appeal by the Revenue was allowed for statistical purposes, and the matter was remanded back to the Assessing Officer for reconsideration of the penalty imposition in light of the ITAT's decision.
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