2019 (11) TMI 910 - AT - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 80IAB - Tribunal has reversing the decision of the AO and Commissioner (Appeals) has treated the interest income earned by the assessee from the fixed deposits and advances given to the contractor as well as lease rental from SEZ as income from business, hence, allowed assessee s claim of deduction u/s 80IAB - HELD THAT - Undisputedly, on the basis of the aforesaid additions made by the AO, penalty under section 271(1)(c) was imposed. Therefore, when the additions on the basis of which the penalty under section 271(1)(c) was imposed have been deleted and assessee s claim of deduction under section 80IAB of the Act in respect of such income has been allowed by the Tribunal, penalty imposed under section 271(1)(c) of the Act cannot survive. Revenue s appeal is dismissed.

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2011-12.
2. Validity of penalty order challenged by the assessee.

Analysis:

Issue 1: Penalty Imposed under Section 271(1)(c) of the Income Tax Act
The appeal by the Revenue and cross objection by the assessee arose from the order dated 23rd November 2016, where the Commissioner of Income Tax (Appeals)-8, Mumbai, deleted the penalty imposed under section 271(1)(c) of the Income Tax Act for an amount of ?82,26,553 for the assessment year 2011-12. The Revenue filed the appeal aggrieved by the decision of the Commissioner in deleting the penalty. The Assessing Officer had treated interest income earned by the assessee as income from other sources, disallowing deduction under section 80IAB of the Act. However, the Tribunal reversed this decision, treating the interest income as business income and allowing the deduction under section 80IAB. Consequently, the penalty imposed under section 271(1)(c) could not survive, as the basis for the penalty was deleted by the Tribunal. The Tribunal upheld the decision of the Commissioner in deleting the penalty, leading to the dismissal of the Revenue's appeal.

Issue 2: Validity of Penalty Order Challenged by the Assessee
In the cross objection, the assessee challenged the validity of the penalty order on legal issues. However, since the Tribunal upheld the decision of the Commissioner in deleting the penalty under section 271(1)(c) in the Revenue's appeal, the grounds raised in the cross objection became redundant and did not require adjudication. Therefore, the cross objection was dismissed. Ultimately, both the Revenue's appeal and the assessee's cross objection were dismissed, affirming the decision to delete the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2011-12. The order was pronounced on 12th July 2019.