Appeal allowed due to rectification order allowing set off of capital losses, rendering penalty inapplicable.

The Tribunal allowed the appeal as the rectification order post the CIT(A)'s decision permitted the set off of capital losses, making the penalty imposed under section 271(1)(c) of the Income Tax Act inapplicable.

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Issues:
Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2010-11. The assessee objected to the penalty confirmed by the Commissioner of Income Tax (Appeals) and raised the issue in the ground of appeal.

2. The Assessing Officer disallowed the set off of long term capital loss against short term capital gains claimed by the assessee, leading to the initiation of penalty proceedings. The AO held that the assessee attempted to evade tax by claiming the set off incorrectly, resulting in a penalty of Rs. 1,68,936 under section 271(1)(c) of the Act.

3. The Commissioner of Income Tax (Appeals) dismissed the appeal filed by the assessee, stating that the claim of set off was an attempt to reduce tax liability and evade taxes. The CIT(A) relied on various case laws to support the decision and confirmed the penalty imposed by the AO.

4. During the proceedings, the assessee argued that a rectification order passed by the AO allowed the set off of the capital losses, rendering the penalty invalid. The AO's rectification order dated 06.11.2017 permitted the set off of Rs. 5,46,720, which was the amount in question for the penalty.

5. The Tribunal found that the rectification order issued by the AO post the CIT(A)'s decision allowed the set off of the capital losses, making the penalty imposed by the AO and confirmed by the CIT(A) redundant. As a result, the Tribunal allowed the appeal, stating that the penalty of Rs. 1,68,936 did not survive after the rectification order.

In conclusion, the Tribunal allowed the appeal as the rectification order post the CIT(A)'s decision permitted the set off of capital losses, making the penalty imposed under section 271(1)(c) of the Income Tax Act inapplicable.

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