Penalty Matter Remanded: ITAT Directs AO to Give Effect to Quantum Appeal Before Deciding [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has remanded the penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, for the Assessment Year (AY) 2016-17, directing the AO to pass an order after giving effect to the quantum appeal in the case of The Co-op Credit Society of VIS Limited.

The Co-op Credit Society of VIS Limited (assessee) filed an appeal against the appellate order dated passed by the Commissioner of Income Tax (Appeals)[CIT(A)]. The appeal arose from a penalty levied under Section 271(1)(c) of the Act for AY 2016-17.

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The Counsel for the assessee argued that the Coordinate Bench of the ITAT, in the assessee’s own case for the same AY 2016-17, had set aside the quantum appeal to the CIT(A) for fresh adjudication.

The Counsel submitted that quantum appeal pertained to the issue of expenses allowable against interest income earned from a nationalized bank. The counsel submitted that the penalty proceedings should be modified in light of the quantum appeal’s outcome.

The two-member bench, comprising T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member), reviewed the materials on record, including the quantum order of the Co-ordinate Bench.

The bench noted that Section 275(1A) of the Act empowers the AO to pass an order imposing, enhancing, reducing, cancelling, or dropping penalty proceedings based on the outcome of an appeal or revision.

The Bench also noted the condition that as stated under section 275(1A) the assessee is given a reasonable opportunity to be heard and the order is passed within six months from the receipt of the appellate or revision order.

The Tribunal directed the AO to pass an order on the penalty matter after giving effect to the CIT(A)’s decision in the quantum appeal. It also held that the penalty proceedings should align with the revised assessment as determined in the quantum appeal.

The tribunal remanded the matter to the AO for further action in accordance with the law. The appeal filed by the assessee was allowed for statistical purposes.

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