ITAT Sets Aside Rs.1.25 Crore Penalty on UP State Bridge Corp, Orders Fresh Review Linked to Pending Quantum Appeal [Read Order]

The Lucknow Bench of the Income Tax Appellate Tribunal (ITAT) has set aside a penalty of Rs.1.25 crore imposed on UP State Bridge Corporation Ltd. under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal has directed a fresh adjudication of the penalty matter in connection with the pending outcome of the quantum appeal.

The appellant in this case is the Assistant Commissioner of Income Tax, Range-1, Lucknow, who challenged the order of the Commissioner of Income Tax (Appeals)-I, Lucknow, dated 11.10.2006, which had cancelled the penalty originally imposed by the Assessing Officer. The penalty had been levied after a long history of assessment and reassessment proceedings relating to the assessment year 1990–91.

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The controversy stemmed from the treatment of an amount of Rs.2,00,62,003 related to Exchange Variation Reserve (EVR) shown on the asset side of the balance sheet, and a depreciation claim of Rs.1,22,82,193 for shuttering items. Originally, the assessee had declared a loss of over Rs.1.55 crore, which underwent multiple revisions and corrections, including actions under Section 263 of the Act by the CIT and consequent reassessments. Ultimately, the penalty was imposed for alleged concealment of income linked to these additions.

However, the Tribunal had earlier deleted the penalty through an order dated 19.04.2007. The Revenue appealed to the Allahabad High Court, which in its order dated 03.02.2012, directed the ITAT to re-examine the penalty issue only after the quantum appeal was disposed of, given that the alleged concealment was linked to additions that were still under dispute.

The ITAT, while rehearing the matter, noted that the quantum appeal had since been partially decided, with some issues restored to the Assessing Officer and CIT(A). Specifically, the addition on account of the Exchange Variation Reserve was sent back to the CIT(A), and the 100% depreciation claim on shuttering items was referred back to the Assessing Officer for re-examination in line with directions given by the CIT(A).

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In light of this, the ITAT held that the fate of the penalty must be reconsidered afresh after the final outcome of the quantum issues. Accordingly, it set aside the order of the CIT(A) dated 11.10.2006 and restored the penalty matter to the Assessing Officer, directing a de novo decision based on the final treatment of the additions in question.

The order was passed by a division bench comprising Kul Bharat, Vice President, and Anadee Nath Misshra, Accountant Member, on 07 February 2025. The appeal has been treated as partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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