ACIT Vs HCC Infrastructure Company Ltd. (ITAT Mumbai)
No Exempt Income, No 14A, No 270A- 14A Disallowance Deleted in Quantum — 270A Penalty Cannot Survive When Quantum Dies, Penalty
Revenue filed appeals against CIT(A)’s common orders dated 04.07.2025 deleting penalty u/s 270A for both AYs 2017-18 & 2018-19. Assessee, engaged in infrastructure development on BOT basis, had claimed no exempt income during the relevant years. AO nevertheless made disallowance of ₹8,60,51,556 u/s 14A r.w. Rule 8D for AY 2017-18 (& similar for AY 2018-19), which was initially confirmed by CIT(A). AO subsequently levied penalty of ₹5,50,05,700 u/s 270A alleging “under-reported income” due to “misreporting”.
During appellate proceedings, Assessee produced the Tribunal’s own quantum order dated 05.07.2023 (ITA Nos. 1220 & 1222/Mum/2023) wherein the disallowance u/s 14A r.w. Rule 8D for both years was deleted on the settled principle that no 14A disallowance can be made when no exempt income is earned. CIT(A), relying on this binding quantum relief, held that the penalty had no surviving foundation & therefore deleted it for both years.
Tribunal noted that the entire basis for penalty u/s 270A was the 14A addition, & since this addition was already struck down in Assessee’s own quantum appeal, the penalty automatically became unsustainable. Tribunal rejected Revenue’s contention that penalty should be kept alive pending High Court appeal, holding that once the quantum itself stands deleted, penalty cannot be sustained on a non-existent addition. Accordingly, Tribunal upheld CIT(A)’s deletion of penalty for both AYs 2017-18 & 2018-19. Revenue’s appeals were dismissed in full.
