2025 (7) TMI 594

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....[hereinafter referred to as "the Act"] for A.Y. 2007-08. Facts in Brief 2. The assessee is a Joint Venture of M/s Dineshchandra R. Agarwal Infracon Pvt. Ltd. and M/s M.S. Khurana Engineering Ltd., constituted for execution of infrastructure contracts. For A.Y. 2007- 08, the assessee filed its return of income on 07.09.2007 declaring Nil income after claiming deduction of Rs. 2,42,98,174/- under section 80IA(4) of the Act. The assessment was completed u/s 143(3) on 24.12.2009 determining total income at Rs. 2,61,21,380/- after making the following additions: i. Disallowance of deduction u/s 80IA(4): Rs. 2,42,98,174/- ii. Disallowance u/s 40(a)(ia): Rs. 18,23,203/- 3. Penalty proceedings were initiated u/s 271(1)(c)....

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....ailure to deduct TDS despite being aware of the legal requirements amounted to a default attracting penal consequences under section 271(1)(c). Therefore, the AO held that the assessee furnished inaccurate particulars of income and levied minimum penalty of Rs. 87,36,356/- under section 271(1)(c). 4. The CIT(A), in the appellate proceedings, held that the assessee's claim under section 80IA(4) was not tenable, as the facts clearly showed the assessee was a sub-contractor and not a developer. Reliance was placed on the language of the Explanation inserted below section 80IA(13). On disallowance under section 40(a)(ia), the CIT(A) held that the assessee was liable to deduct TDS on financial charges, and failure to do so attracted the deemi....

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....ppellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal. 6. During the course of hearing, the Ld. AR brought to our notice that in the assessee's quantum appeal in ITA No. 2449/Ahd/2010, the Co-ordinate Bench vide order dated 29.04.2025 has restored the matter to the file of the AO. The AR therefore prayed that the present penalty proceedings be also restored to the file of the AO, as the levy of penalty under section 271(1)(c) is contingent upon the outcome of the quantum proceedings. The Ld. DR raised no objection. 7. We have considered rival contentions and carefully perused the material available on record. It is an admitted position that the quantum assessment order....

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.... a matter of fairness and legal coherence, that the penalty proceedings also be restored to the same stage and re-examined in alignment with the final outcome of the quantum proceedings. 10. Moreover, penalty under section 271(1)(c) is not an automatic consequence of an addition or disallowance; it requires a deliberate satisfaction of the conditions stipulated under the provision. Where the quantum addition is itself subject to re-examination, the prerequisite conditions for invoking penalty stand unresolved. As such, the fate of the penalty proceedings must await the finality of the quantum assessment. Accordingly, when the substantive matter is remanded for fresh adjudication, it becomes imperative that the penalty proceeding be simil....