The Income Tax Appellate Tribunal (ITAT), Kolkata bench has held that the penalty under section 271(1)(c) of the Income Tax Act is not sustainable when the Tribunal has deleted the quantum addition.
The assessee, Eastern Devcon Limited filed its return of income declaring a loss of Rs.51,87,901/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. The ld. Assessing Officer has observed that in A.Y. 2011-12, the assessee-company had taken the opening stock value of the flats ready for sale at Rs.1,07,31,700/-.
On appeal, the Tribunal deleted the addition. However, the penalty orders passed by the income tax department simultaneously were still under process.
The ITAT bench comprising Shri Rajpal Yadav, Vice-President (KZ) & Shri Girish Agrawal, Accountant Member observed that while deleting the addition, the Tribunal has directed the Assessing Officer to allow the loss suffered by the assessee.
Quashing the penalty order, the ITAT observed that “Sub-clause (iii) of section 271(1)(c) provides a method of computation of the penalty. According to this sub-clause, a penalty is to be computed either equivalent to the taxes on the additions made to the declared income or three times of taxes on such addition. In the present case, the very addition in the declared income has been deleted by the Tribunal therefore, there is no foundation to compute the penalty upon the assessee. In view of the deletion of the additions in the quantum appeal, no penalty is imposable upon the assessee. Accordingly, the present appeal is allowed and the penalty imposed upon the assessee is deleted.”
Shri Raj Kumar Agarwal, C.A, appeared on behalf of the assessee and Shri P.P. Barman, Addl. CIT appeared on behalf of the Revenue.
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