Kalna II CADP Farmers Service Co-Op. Society Limited Vs ITO (ITAT Kolkata)
In a significant ruling by the Income Tax Appellate Tribunal (ITAT) Kolkata, the case of Kalna II CADP Farmers Service Co-Op. Society Limited vs. ITO has set an important precedent regarding penalties under Section 271(1)(c) of the Income Tax Act. The tribunal’s decision, dated April 27, 2023, highlights that no penalty under this section can be imposed if the addition, which formed the basis for computing the penalty, has been deleted by the appellate authority.
Detailed Analysis
The crux of the appeal before ITAT Kolkata revolved around the penalty of INR 4,44,815/- imposed under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2016-17. The primary contention from the assessee’s side was that the addition on which this penalty was computed had been deleted by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in a previous order dated 14.07.2020.
Upon careful examination of the submissions and the relevant legal provisions, ITAT Kolkata observed that Section 271(1)(c)(iii) lays down the mechanism for the computation of the penalty, which is essentially contingent on the additions made to the assessee’s income as disclosed in the return filed under Section 139(1). The penalty, according to this section, could either be equivalent to the tax sought to be evaded or a maximum of 300 times the said amount.
Given that the foundational basis for computing the penalty, i.e., the addition to the assessee’s income, was no longer present following the CIT(Appeals)’s decision to delete the addition, ITAT Kolkata held that imposing a penalty under Section 271(1)(c) was untenable. Consequently, the tribunal allowed the appeal and ordered the deletion of the penalty.
