2018 (9) TMI 347 - AT - Income Tax

Tribunal cancels penalty under IT Act, emphasizing legal procedures for justice.

The Tribunal canceled the penalty imposed under section 271(1)(c) of the I.T. Act in the case of Spirit Infradevelopers Pvt. Ltd. for A.Y. 2011-2012. The ... Levy of penalty u/s 271(1)(c) - mistake in the letter of the Counsel for Assessee - Held that:- If there were mistake in the letter of the Counsel for Assessee, CIT(A) should have gone by the Order of the Tribunal and by following the Order of the Tribunal should have set aside and delete the penalty in the matter because there were no foundation exist for levy of the penalty against the assessee-company. CIT(A), in such circumstances, should not have allowed withdrawal of the appeal by the Counsel for the Assessee. If the Counsel for Assessee has committed a blatant mistake that should not have been allowed to continue by the First Appellate Authority and he was required by Law to follow the Order of the Tribunal to do substantial justice between the parties. No justification for CIT(A) to dismiss the appeal of assessee-company as withdrawn because it is well settled Law that assessee-company having once filed an appeal cannot withdraw it. Assessee-company under such circumstances was fully justified for filing appeal before the Tribunal. We, therefore, reject the contention of the CIT-D.R. that assessee-company cannot file appeal before the Tribunal in such circumstances. Issues involved:Challenging the levy of penalty under section 271(1)(c) of the I.T. Act, 1961.Detailed Analysis:Issue 1: Penalty imposed under section 271(1)(c) of the I.T. Act, 1961In the case of Spirit Infradevelopers Pvt. Ltd. for A.Y. 2011-2012, the assessee challenged the penalty imposed under section 271(1)(c) of the I.T. Act. The assessment was completed under section 147 read with section 143(3) of the I.T. Act, determining an income against the declared loss. The penalty proceedings were initiated as the assessee failed to prove unsecured loans in the books of account. The CIT(A) dismissed the appeal, leading to the penalty order. However, the Tribunal quashed the re-assessment proceedings, rendering the basis for the penalty null. The counsel for the assessee mistakenly requested withdrawal of the appeal before the CIT(A), but the Tribunal's order should have been followed, leading to the cancellation of the penalty.Issue 2: Application of relevant provisions of LawThe Tribunal emphasized the duty of the Assessing Officer to apply relevant provisions of the law to determine the true taxable income of the assessee. In this case, the Tribunal accepted the appeal of the assessee-company, leading to the quashing of all additions made in the re-assessment order. Despite a mistake in the withdrawal request, the CIT(A) should have considered the Tribunal's order and canceled the penalty as there was no basis for its imposition. The CIT(A) erred in allowing the withdrawal of the appeal, as established law dictates that once an appeal is filed, it cannot be withdrawn. The Tribunal set aside the orders of the lower authorities and canceled the penalty, emphasizing the need to follow legal procedures and substantive justice.Issue 3: Disposal of appeals and cancellation of penaltiesIn the subsequent appeals by other assessees, the Tribunal followed the reasoning and decision of the Spirit Infradevelopers Pvt. Ltd. case. The Tribunal set aside the orders of the lower authorities and canceled the penalties imposed under section 271(1)(c) of the I.T. Act for the respective assessment years. The Tribunal allowed all the appeals of the three assessees, emphasizing the importance of adherence to legal procedures and the application of relevant legal provisions in determining taxable income and penalties.This comprehensive analysis highlights the legal intricacies involved in challenging the levy of penalties under the I.T. Act and the significance of following established legal principles and tribunal decisions in such matters.