Exemption Claim u/s 10(26BBB): ITAT Deletes Penalty u/s 271 in view of Pending Uttarakhand HC Adjudication [Read Order]

The Income Tax Appellate Tribunal ( ITAT ) Dehradun bench upheld the deletion of penalty amounting to ₹2.30 crores imposed on the assessee under Section 271(1)(c) of the Income tax Act, 1961. The Tribunal held that the issue of exemption claimed by the assessee under Section 10(26BBB) is sub judice before the Uttarakhand High Court.

The assessee Uttarakhand Poorv Sainik Kalyan Nigam Ltd. claimed exemption under Section 10(26BBB) of the Income Tax Act, 1961. The Assessing Officer, however, denied exemption on the grounds that the assessee is not a statutory corporation.

However, the Assessing Officer held that the income is taxable. The penalty proceeding for concealment of income under Section 271(1)(c) was initiated. The penalty of ₹2,30,99,600 was imposed on the assessee for concealment of income. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the appeal by deleting the penalty imposed on the assessee by following the Tribunal’s order in the assessee’s own case.

The Revenue has raised a contention that the assessee has furnished incorrect particulars of income by claiming an exemption which is not eligible. On the other hand, the assessee has raised a contention that the eligibility of the claim of Section 10(26BBB) is pending before the Uttarakhand High Court for the earlier assessment years which has a direct bearing on the proceedings before the Bench.

It has been highlighted that the assessee has offered an undertaking in accordance with Section 158A and has agreed to be bound by the final outcome of the High Court.

The Tribunal comprising Mahavir Singh [Vice President] and Manish Agarwal [Accountant Member] held that since the assessee has offered an undertaking in accordance with Section 158A, agreeing to be bound by the final outcome of the High Court it has a direct bearing on the outcome of the penalty proceedings and therefore, no reason has been seen for sustaining the penalty.

Accordingly, the Bench found no infirmity in the order of the CIT(A) deleting the penalty.

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