2024 (2) TMI 533 - AT - Income Tax

Penalty u/s 271(1)(c) - CIT(A) justification in deleting the penalty levied by AO u/s 271(1)(c) when Department is presently in appeal before the High Court of Gujarat against the order passed by Hon ble ITAT deleting the quantum addition - HELD THAT - At the time of hearing before us, we observe that, in the quantum appeal, the Tribunal has deleted the quantum addition in 2021 (4) TMI 199 - ITAT AHMEDABAD . In the light of the order of the Tribunal in the quantum proceedings where the Tribunal deleted the addition, and in view of the Department s appeal to the High Court challenging the deletion of the said addition, it is pertinent to note that the High Court has neither overturned the Tribunal s order nor issued a stay order as of now. Accordingly, the Tribunal s decision retains its legal validity, and presently no addition stands. Consequently, the penalty imposed by the Department under Section 271(1)(c) of the Act on the impugned addition is legally unsustainable. Decided in favour of assessee.

Summary

Issues involved:
The appeal by Revenue against CIT(A)'s order deleting penalty under section 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 2010-11.

Summary:

Issue 1: Deletion of penalty under section 271(1)(c) by CIT(A)

The assessee, a Private Limited Company engaged in BPO services, filed its return for AY 2010-11 declaring total income after deduction under section 10B of the Act. Upon scrutiny, the Assessing Officer made additions and disallowances. The CIT(A) confirmed the addition under section 10B but deleted the disallowance towards expenses on STCG. Subsequently, a penalty under section 271(1)(c) was levied by the Assessing Officer, which was cancelled by the CIT(A). The Tribunal observed that in the quantum appeal, the Tribunal had deleted the addition, and the High Court had not overturned this decision or issued a stay order. Therefore, the Tribunal's decision retaining its validity rendered the penalty imposed by the Department legally unsustainable. Consequently, the order of the CIT(A) deleting the penalty was upheld, and the Revenue's appeal was dismissed.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) as the Tribunal's decision in the quantum appeal remained valid, and no addition stood. The Revenue's appeal was dismissed.