2024 (2) TMI 219 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - rejecting the claim of the assessee u/s 54B - HELD THAT - As decision of the ITAT in the assessee's own case for the relevant A.Y. 2018 (10) TMI 2018 - ITAT RAIPUR regarding quantum of addition by rejecting the claim of the assessee u/s 54B, which was deleted by the ITAT in the said order. As discernible from the orders of the authorities below, the penalty u/s 271(1)(c) was imposed on the assessee keeping in mind the orders of AO and confirmation of the disallowance by the Ld. CIT(A). However, it is an admitted fact that, as per the decision of ITAT on the same issue, the addition of quantum, which was the basis for imposing the penalty, has been vacated by setting aside the orders of Ld. CIT(A). Under such facts and circumstances where the quantum addition itself has been deleted, the penalty imposed on the basis of such quantum addition cannot survive. Accordingly, we direct to delete the penalty-initiated u/s 271(1)(c) in the present case. Appeal of assessee allowed.

Summary

Issues:
The case involves an appeal against the order of Commissioner of Income Tax (Appeals) regarding the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10.

Issue 1 - Arbitrary Order of CIT(A):
The appellant contended that the order of the Ld. Commissioner of Income Tax (Appeals) was arbitrary, bad in law, and facts.

Issue 2 - Confirmation of Penalty by CIT(A):
The Ld. CIT(A) confirmed the levy of penalty under section 271(1)(c) imposed by the Ld. Assessing officer, which was challenged by the appellant.

Facts and Decision:
The appellant, an individual, filed the return of income for the AY 2009-10 and was subjected to scrutiny assessment under section 143(3). The Ld. AO made a disallowance under section 54B of the IT Act, which was challenged before the Ld. CIT(A) and subsequently before the ITAT, Raipur. The ITAT decided in favor of the assessee, leading to the deletion of the quantum addition that formed the basis for the penalty under section 271(1)(c). Despite the penalty order, the ITAT held that since the quantum addition had been vacated, the penalty could not be sustained. The penalty was thus directed to be deleted, and the appeal of the assessee was allowed.

Significant Points:
- The penalty initiated by the Ld. AO was deemed arbitrary and bad in law.
- The penalty was imposed based on the quantum addition, which was later vacated by the ITAT.
- The Ld. CIT(A) confirmed the penalty, but the ITAT ruled in favor of the assessee due to the deletion of the quantum addition.
- The penalty under section 271(1)(c) was directed to be deleted, considering the circumstances where the basis for the penalty no longer existed.

Conclusion:
The ITAT, Raipur allowed the appeal of the assessee, directing the deletion of the penalty imposed under section 271(1)(c) for the assessment year 2009-10.