Extensive Trading Pvt Ltd Vs ITO (ITAT Delhi)
No Exempt Income, No 14A, No Penalty -When Quantum Addition Falls, 270A Penalty Cannot Survive—ITAT Delhi Quashes Penalty
Tribunal considered penalty of ₹19,51,100 levied by AO u/s 270A. The penalty was based on disallowance u/s 14A. Assessee submitted that Tribunal, in its quantum appeal ITA 625/Del/2025 dated 14.05.2025, had already deleted the 14A disallowance by holding that the Finance Act 2022 amendment inserting a non-obstante clause & explanation in s.14A applies prospectively from 01.04.2022, & no disallowance can be made where no exempt income is earned. Tribunal accepted this submission & held that once the quantum addition no longer survives, the penalty automatically fails. CIT(A)’s refusal to condone delay also stood eclipsed since the core issue—validity of penalty—was answered in Assessee’s favour. Tribunal therefore quashed the penalty in full & allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the Assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [‘Ld. CIT(A) in short] dated 19.07.2024 passed U/s 250(6) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) for Assessment Year 2018-19.
2. The assessee has raised the following grounds of appeal :-
“1. Ground 1. For that on the facts and in the circumstances of the case the Learned CIT(A) erred in not condoning delay in filing appeal before him through there is a reasonable cause for the delay.
2. Ground 2. For that on the facts and circumstances of the case, the Ld. CIT(A) ought to have considered that the penalty order u/s 270A passed by the Ld. A.O. is bad in law and is liable to be quashed.
3. Ground 3. For that on the facts and circumstances of the case, the Ld. CIT(A) was not justified in confirming the amount of penalty imposed by the Ld. AO amounting to Rs.19,51,100/- u/s 270A of the Act.
4. Ground 4. For that the penalty imposed by the A.O. to the tune of Rs.19,51,100/- is not sustainable since the quantum addition on which basis such penalty was imposed has been deleted by the Hon’ble Tribunal vide an order dated 14.05.2025.
5. Ground 5. The appellant craves leave to add, alter or delete all or any of the grounds of appeal at the time of hearing.”
3. At the outset, the Learned AR submitted that the Tribunal, while deciding appeal of the assessee ITA 625/Del/2025(AY 2018-19), observed that amendment made by Finance Act, 2022 to section 14A of the Act by inserting a non-obstante clause and explanation will take effect from 01/04/2022 and cannot be presumed to have retrospective effect and no disallowance could be made u/s 14A of the Act if no exempt income was earned by the appellant and accordingly appeal was allowed. It is also submitted that the impugned penalty order is quite erroneous because the addition made by the Learned AO deleted as mentioned hereinbefore by the Tribunal vide order Dated 14/05/2025.
