2017 (10) TMI 163 - AT - Income Tax

Penalty u/s. 271(1)(c) - excess deduction claimed in terms of provision of section u/s. 80IAB(10) read with section 80IAB(3) - Held that - It is notable that the addition, on the basis of which the impugned penalty has been imposed, observing inaccurate particulars of income furnished by the assessee, has been deleted by the Tribunal, as also observed by the ld. CIT(A) in the impugned order reproduced above. Therefore, once the very basis of imposition of penalty, stands collapsed, there remains no justification to sustain the penalty in the instant case. We accordingly, find no good ground to disturb the decision reached by the ld. CIT(A) in the impugned order while canceling the penalty. Hence, the appeal of the Revenue has no merit and deserves to fail.

Summary

Issues:
Appeal against deletion of penalty u/s. 271(1)(c) of the IT Act for AY 2009-10.

Analysis:
The case involved an appeal by the Revenue against the deletion of a penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2009-10. The dispute arose from the disallowance of a deduction claimed by the assessee under section 80IAB related to the income from the development of a Special Economic Zone. The Assessing Officer rejected a portion of the deduction claimed by the assessee, leading to the initiation of penalty proceedings. The penalty was imposed by the AO, but the ld. CIT(A) canceled the penalty based on various grounds.

The ld. CIT(A) canceled the penalty primarily on the basis that the very foundation of the penalty was quashed by the Income Tax Appellate Tribunal for the relevant assessment year. The Tribunal had allowed the assessee's appeal in full against the order of the Commissioner of Income Tax (Appeal) and dismissed the department's appeal. This decision formed the basis for canceling the penalty. Additionally, it was noted that in the preceding and succeeding assessment years, no addition had been made or sustained on the issue in question, further supporting the cancellation of the penalty.

Furthermore, the ld. CIT(A) highlighted that in a similar case for the AY 2008-09, where the entire addition was deleted by the Tribunal, no penalty under section 271(1)(c) was imposed by the Assessing Officer. This inconsistency in treatment of identical facts led to the conclusion that the penalty in the current case was unjustified. The ld. CIT(A) also referenced a decision of the Delhi High Court regarding the limitation under section 275(1)(a) of the Income Tax Act, emphasizing the need for proper exercise of jurisdiction by the Assessing Officer.

Upon considering the arguments presented by both the ld. DR and ld. AR, the Tribunal found no valid reason to interfere with the decision of the ld. CIT(A) to cancel the penalty. The Tribunal noted that the basis for imposing the penalty had been nullified by the Tribunal's decision to delete the addition, and the ld. CIT(A) had correctly relied on this aspect. The Tribunal also emphasized the department's acceptance of the deduction claim in other assessment years and the lack of justification to uphold the penalty in the present case. Consequently, the appeal of the Revenue was dismissed, affirming the cancellation of the penalty by the ld. CIT(A.