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TMI Blog2017 (4) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue has preferred Tax Appeal No.828 of 2016 with the following proposed questions of law: (a) Whether on the facts and circumstances of the case and in law, the ITAT was justified in law in deleting the penalty u/s. 271(1)(c) of the Act on the issue of disallowance of deduction u/s. 80IB of the Act relating to price paid by the for purchase of raw materials at low rate? (b) Whether on the facts and circumstances of the case and in law, the ITAT was justified in law in holding that "Since the addition on account of notional selling and distribution has been deleted in quantum proceedings, the penalty order passed with respect to such addition has no legs to stand", without appreciating that the issue involved has not attained finality, since the revenue's appeal against the order of ITAT Mumbai deleting quantum addition on the issue of selling and distribution expenses in the assessee's case for A.Y. 2004-2005 is pending for adjudication before Hon'ble High Court of Mumbai? (c) Whether on the facts and circumstances of the case and in law, the ITAT was justified in law in holding that penalty is not leviable in respect of disallowance u/s. 80IB of the Act on account of ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case and in law, the ITAT was justified in deleting the penalty u/s. 271(1)(c) of the Act on the issue of disallowance of deduction u/s. 80IB of the Act relating to interest income received for A.Y. 2006-07 ignoring the finding recorded by the A.O. in the penalty order to that effect? 1.3 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned ITAT in ITA No. 181/Mum/2014 for the A.Y. 2007-2008 by which the learned ITAT has dismissed the said Appeal preferred by the Revenue and has confirmed the order passed by the learned C.I.T.(A) deleting the penalty imposed under Section 271(1)(c) of the Act, Revenue has preferred Tax Appeal No. 830 of 2016 with the following proposed questions of law: (a) Whether on the facts and circumstances of the case and in law, the ITAT was justified in law in deleting the penalty u/s. 271(1)(c) of the Act on the issue of disallowance of deduction u/s. 80IB of the Act relating to price paid by the for purchase of raw materials at low rate? (b) Whether on the facts and circumstances of the case and in law, the ITAT was justified in law in holding that "Since the addition on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting that in income tax proceedings, each assessment year is distinct and the facts of the case varies from year to year? (c) Whether on the facts and circumstances of the case and in law, the ITAT was justified in law in deleting the penalty u/s. 271(1)(c) of the Act on the issue of disallowance of deduction u/s. 80IB of the Act relating to interest income received for A.Y. 2008-09 ignoring the finding recorded by the A.O. in the penalty order to the effect "Assessee was required to disclose true and correct particulars of income in the return of income and to work out the correct income for taxation purpose which it did not do. The assessee was aware of the fact that this particular does not qualify for deduction u/s. 80IB of the Act, 1961"? 2. The facts leading to the present Appeals in nutshell are as under: 2.1 The Assessing Officer made addition of raw materials claimed by the assessee on account of excess expenditure incurred by SPIL on selling and distribution expenses while passing the assessment orders for the years under consideration. The Assessing Officer also made disallowance on account of interest of staff loan / bank FD. The chart showing the disallowance mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned C.I.T.(A) as well as learned ITAT have deleted the penalty solely on the ground that in the quantum proceedings the additions made on account of notional selling and distribution expenses have been deleted by the learned ITAT, and therefore, since the addition on account of notional selling and distribution have been deleted in quantum proceedings, the penalty order, passed in respect of such addition, has no legs to stand. It is submitted that against the orders passed by the learned ITAT deleting the additions made by the Assessing Officer made on account of notional selling and distribution expenses, the matter is at large before Hon'ble the Bombay High Court and the Appeals preferred by the Revenue are admitted and are pending for final disposal before the Hon'ble the High Court, the learned ITAT has materially erred in deleting the penalty, more particularly, when the quantum proceedings are at large before Hon'ble the Bombay High Court, and therefore, it is requested to admit the present Appeals, more particularly, when the learned ITAT has not discussed anything on merits with respect to the penalty imposed under Section 271(1)(c) of the Act. 4. All these appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon'ble High Court and in case the Revenue succeeds before the High Court, in that case, it will be open for the Revenue to initiate penalty proceedings afresh and to that extent the interest of the Revenue is protected, and therefore, he has no objection if the Appeals are disposed of with such observations. 4.3 Now, so far as the penalty imposed with respect to the bank deposit / staff loan is concerned and the disallowance under Section 80IB on account of interest income of bank deposit / staff loan is concerned, it is submitted by Shri Soparkar, learned senior counsel appearing on behalf of the assessee, that the learned ITAT has deleted the penalty with respect to the above by observing that the assessee had furnished all details. It is submitted that it is rightly observed by the learned ITAT that merely a claim, which is found to be not sustainable in law, the penalty cannot be imposed under Section 271(1)(c) of the Act. It is submitted that therefore the learned ITAT has rightly deleted the penalty with respect to the interest claimed on bank deposit / staff loan i.e. with respect to the disallowances under Section 80IB on account of interest income on bank d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned ITAT deleting the aforesaid additions or the Hon'ble High Court may set aside the order passed by the learned ITAT deleting the aforesaid additions and may restore the order passed by the Assessing Officer. If the Hon'ble High Court confirms the order passed by the learned ITAT deleting the aforesaid additions, naturally, there is no question of imposing any penalty on such additions as the addition itself is ordered to be deleted. In case the Revenue succeeds before the Hon'ble High Court and the Hon'ble High Court reverses the order passed by the learned ITAT and the learned C.I.T.(A) and restores the assessment order/orders passed by the Assessing Officer making the aforesaid additions, in that case, the imposition of penalty is required to be considered in light of Section 271(1)(c) of the Act. At this stage, Section 275(1)(A) is required to be considered which reads as under: "275(1A): In a case where the relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under Section 253 or an appeal to the High Court under section 260A or an appeal to the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty proceedings afresh after the decision of the Hon'ble High Court in the pending Appeals, which are against the deletion of the aforesaid additions and in case the Revenue succeeds before the Hon'ble High Court within the stipulated time, as mentioned in proviso to Section 275(1)(A) of the Act, if the aforesaid procedure is adopted, in that case, the interest of the Revenue shall also be protected. 6. Now so far as deletion of the penalty by the learned ITAT with respect to the interest income on bank deposit / staff loan in respect of disallowance under Section 80IB on account of interest income on bank deposit / staff loan is concerned, at the outset it is required to be noted that as such the amount of penalty imposed on the aforesaid would be too small. Apart from above, even there is a clear finding by the learned ITAT that with respect to the above the assessee had furnished all details. Under the circumstances, the case will not fall in any of the parameters mentioned under Section 271 (1)(c) of the Act as rightly observed by the learned ITAT. Under the circumstances, the present Appeals with respect to the deletion of the penalty in respect of the dis-allowances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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