2022 (9) TMI 1181 - AT - Income Tax

Appeals allowed, penalties deleted under sections 14A, DTAA, and 80IA(4). CIT(A) decision upheld.

M/s. IRCON International Ltd. Versus The DCIT, Circle – 12 (2), New Delhi. And (Vice-Versa)

The ITAT allowed the assessee's appeal and dismissed the Revenue's appeal. The penalties related to the disallowance under section 14A, exclusion of ... Penalty u/s 271(1)(c) - disallowance under section 14A- HELD THAT:- As far as the first issue of disallowance under section 14A is concerned, the Ld. CIT(A) deleted the penalty and the Revenue did not appeal before us. Therefore, we uphold the order of Ld. CIT(A) on this issue in absence of any appeal and in absence of any objection from the side of the Ld. D.R. and delete the penalty levied by the A.O. on this issue. Exclusion of Income under DTAA Agreement and denying claim of deduction under section 80IA(4) - We find that in assessee’s own case for the A.Y. 2011-12 in quantum appeal [2022 (1) TMI 1276 - ITAT DELHI]decided the issues in favour of the assessee. Since the issues in quantum appeal are decided in favour of the assessee, the penalty does not survive on these issues. We, therefore, direct the A.O. to delete the penalty on these issues i.e., i.e., Exclusion of Income under DTAA Agreement and denying claim of deduction under section 80IA(4) of the I.T. Act, 1961. Appeal of the Assessee is allowed. Issues Involved:1. Disallowance under section 14A.2. Exclusion of Income under DTAA Agreement.3. Denying claim of deduction under section 80IA(4).Issue-wise Detailed Analysis:1. Disallowance under section 14A:The assessee company, a Government of India undertaking, filed its return of income for A.Y. 2011-12 declaring total income at Rs. 56,51,36,481/-. The A.O. disallowed Rs. 1,36,47,143/- under section 14A and levied a penalty of Rs. 153,24,26,390/-. The Ld. CIT(A) deleted the penalty related to this disallowance, and the Revenue did not appeal against this deletion. Therefore, the ITAT upheld the Ld. CIT(A)'s order and deleted the penalty levied by the A.O. on this issue.2. Exclusion of Income under DTAA Agreement:The A.O. excluded Rs. 4,38,64,96,302/- of income under the DTAA Agreement and imposed a penalty. The Ld. CIT(A) directed the quantum of penalty to be revised based on the tax credit related to this exclusion. However, the ITAT, in a consolidated order dated 28.01.2022 for the A.Ys. 2006-07 to 2013-14, decided the issue in favor of the assessee, thereby deleting the quantum addition. Consequently, the penalty does not survive as the quantum addition itself was deleted. The ITAT directed the A.O. to delete the penalty related to this issue.3. Denying claim of deduction under section 80IA(4):The A.O. denied the assessee's claim of deduction amounting to Rs. 70,79,44,520/- under section 80IA(4) and imposed a penalty. The Ld. CIT(A) upheld the penalty, but the ITAT, in its consolidated order dated 28.01.2022, decided the issue in favor of the assessee. The ITAT noted that the assessee was engaged in the development of infrastructure facilities and not merely acting as a contractor, as previously adjudicated in earlier years. The ITAT directed the A.O. to delete the penalty since the quantum addition was deleted.Conclusion:The ITAT concluded that since the quantum additions related to the exclusion of income under the DTAA Agreement and the denial of the deduction under section 80IA(4) were deleted, the penalties on these issues do not survive. The penalty related to the disallowance under section 14A was also deleted as the Revenue did not appeal against the Ld. CIT(A)'s order. Thus, the appeal of the assessee was allowed, and the appeal of the Revenue was dismissed.Order Pronouncement:The order was pronounced in the open Court on 21.09.2022.