2023 (9) TMI 385 - AT - Income Tax

Tribunal cancels penalty under section 271(1)(c) citing ITAT decision and Supreme Court precedent.

The Tribunal allowed the appeal, setting aside the penalty order u/s 271(1)(c) as the assessment order, forming the basis of the penalty, was set aside by ... Penalty levied u/s 271(1)(c) - denying exemption u/s. 10(23C) (iii ad) claimed by the appellant as per the return of income - HELD THAT:- Admittedly, in the present case, since the quantum appeal of the assessee in [2023 (8) TMI 327 - ITAT RAIPUR] was set aside by the ITAT, Raipur, therefore, respectfully following the ratio of law laid down in the case of K.C. Builders vs. ACIT (2004 (1) TMI 7 - SUPREME COURT), we are of the considered opinion that the penalty order passed by the Ld. Assessing Officer u/s 271(1)(c) and sustained by the Ld. CIT(A) cannot stand by itself and the same is liable to be cancelled. Appeal of the assessee is allowed. Issues Involved:The appeal filed by the assessee against the penalty order u/s 271(1)(c) for AY 2015-16, challenging the decision of Ld. CIT(A) regarding the confirmation of penalty.Summary:Issue 1: Confirmation of Penalty u/s 271(1)(c)The appeal was against the penalty order levied by the Ld. AO u/s 271(1)(c) at Rs. 2,40,630, with the assessee arguing that the provisions of Sec. 271(1)(c) were not applicable and the penalty should be cancelled. The Ld. CIT (A) confirmed the penalty, leading to the appeal.Issue 2: Opportunity for Default in Penalty ProceedingsThe appellant contended that the Ld. AO did not provide an opportunity to explain the default for which penalty proceedings were initiated, yet the penalty was confirmed. The appellant prayed for the cancellation of the penalty.Issue 3: Timing of Income Assessment and RegistrationThe Ld. CIT (A) confirmed the penalty despite the income being assessed at Nil due to registration u/s 12A granted after the return of income was filed. The appellant argued that deduction u/s 11 was available, and thus the penalty should be cancelled.Detailed Judgment:The assessee, an educational institute, filed its return of income declaring total income as Nil. The assessment was completed by the Ld. AO by denying exemption claimed by the appellant, leading to a penalty u/s 271(1)(c) for concealment of income.The assessee's appeal before the Ld. CIT(A) was dismissed, prompting the current appeal challenging the decision. The Ld. AR cited a previous order by ITAT Raipur in the assessee's case, indicating that the penalty order could not stand as the assessment order was set aside.The Ld. Sr. DR supported the orders of the lower authorities, but the Tribunal, after considering the arguments and precedents, concluded that the penalty order could not be sustained as the assessment order forming its basis was set aside. Citing the precedent set by the Hon'ble Apex Court, the Tribunal cancelled the penalty order passed by the Ld. AO and upheld by the Ld. CIT(A).In conclusion, the Tribunal allowed the appeal of the assessee, setting aside both the orders of Ld. CIT(A) and Ld. AO pertaining to the levy of penalty u/s 271(1)(c) due to the foundation of the penalty order being lost when the assessment order was set aside by the ITAT.Order pronounced in the court on 06/09/2023.