ITAT Sets Aside S.271(1)(c) Penalty as Additions Were Deleted and Claims Were Based on CA- Certified Audit Report [Read Order]
The tribunal agreed with the submissions, stating that once the additions stood deleted, the foundation for levying penalty no longer survived.
penalty - audit - Taxscan
penalty - audit - Taxscan
The Delhi Bench of IncomeTax Appellate Tribunal ( ITAT ) set aside the penalty order under Section 271(1)(c) of Income Tax Act,1961,holding it unsustainable as all additions made in the assessment were already deleted and the claims were based on a CA-certified audit report.
Kissan Petro Oils Private,appellant-assessee, was engaged in the business of manufacturing and sale of methyl ester. It filed its return of income on 30.09.2015, declaring a loss of ₹7.38 crore, which was processed under Section 143(1). The case was later selected for complete scrutiny through CASS.
Notices were issued under Sections 143(2), 142(1), 274 r.w.s. 271(1)(b), and 144. During the assessment proceedings, the authorised representative appeared and submitted basic financials. The Assessing Officer (AO) passed the assessment order on 30.12.2017 and separately initiated penalty proceedings.
Show cause notices for penalty under Section 271(1)(c) were issued, and a penalty order was passed on 31.03.2022. The assessee's appeal against the penalty before the Commissioner of Income Tax (Appeals)[CIT(A)] was dismissed on 15.07.2024. The present appeal was filed against this order.
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The assessee counsel argued that the CIT(A) had wrongly confirmed the penalty order without any valid reason to believe that income was concealed or incorrect particulars were furnished. It was submitted that all additions made in the assessment order dated 30.12.2017 were already deleted by the ITAT in its order dated 31.05.2024.
The counsel also stated that the penalty was not justified since the expense claims were based on a CA-certified audit report, referring to the Supreme Court ruling in CIT vs. Reliance Petroproducts (P) Ltd. (2010).
The departmental representative supported the findings of the lower authorities.
The two member bench comprising Vimal Kumar (Judicial Member) and S Rifaur Rahman (Accountant Member) noted that the penalty order dated 31.03.2022 was based on the assessment order dated 30.12.2017. Since all additions made in that assessment were already deleted by the tribunal in its order dated 31.05.2024, the basis for penalty no longer existed.
It also held that the penalty was not justified as the expense claims were made based on a CA-certified audit report, following the Supreme Court ruling in CIT vs. Reliance Petroproducts (P) Ltd.. The appellate tribunal therefore set aside the penalty order as unsustainable.
Accordingly,the appeal was allowed.
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