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of <h1>ITAT vacates penalties & additions, granting relief to assessee under Income Tax Act</h1> <h3>Chhattisgarh Metaliks and Alloys Private Limited Versus The Income Tax Officer-3 (3), Raipur (C.G.)</h3> Chhattisgarh Metaliks and Alloys Private Limited Versus The Income Tax Officer-3 (3), Raipur (C.G.) - TMI Issues Involved:1. Confirmation of penalty u/s 271(1)(c) of the Income Tax Act, 1961.2. Consideration of pending appeal against the assessment order.3. Validity of additions towards unexplained credit u/s 68 of the Act.4. Validity of additions u/s 56(2)(viib) of the Act.Summary of Judgment:1. Confirmation of Penalty u/s 271(1)(c) of the Income Tax Act, 1961:The assessee challenged the penalty of Rs.10,95,149/- imposed by the Assessing Officer (A.O) u/s 271(1)(c) of the Income Tax Act, 1961. The CIT(Appeals)-NFAC confirmed the penalty, leading the assessee to appeal before the ITAT.2. Consideration of Pending Appeal Against the Assessment Order:The assessee argued that the CIT(Appeals)-NFAC erred in confirming the penalty without considering that the merits of the case against the assessment order were still pending before the ITAT.3. Validity of Additions Towards Unexplained Credit u/s 68 of the Act:The A.O had added Rs.34,46,600/- towards unexplained credit u/s 68 of the Act. The Tribunal, in its order dated 26.07.2022, vacated this addition, concluding that the investment made by M/s. Aayush Steelco Pvt. Ltd. towards share application money was duly explained and sourced from its capital account with M/s. Sri Balaji Iron & Steel Traders.4. Validity of Additions u/s 56(2)(viib) of the Act:The A.O had also made an addition of Rs.75,000/- u/s 56(2)(viib) of the Act, which was upheld by the CIT(Appeals). The Tribunal found that the additional shares were allotted on a pro-rata basis to existing shareholders, and there was no disproportionate allotment. Therefore, the provisions of section 56(2)(viib) were not applicable, and the addition was vacated.Conclusion:Since the basis for imposing the penalty u/s 271(1)(c) of the Act had been vacated by the Tribunal, the penalty imposed by the A.O could not be sustained. The ITAT vacated the penalty of Rs.10,95,149/- imposed by the A.O and allowed the appeal of the assessee.Order Pronounced:The order was pronounced in the open court on 13th March 2023.
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