Case Law Details
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.
Conclusion
The ITAT Kolkata’s ruling in favor of Kalna II CADP Farmers Service Co-Op. Society Limited serves as a crucial reminder of the legal principles governing the imposition of penalties under the Income Tax Act. This decision underscores the necessity for a concrete basis in the form of additions to the assessee’s income for levying penalties under Section 271(1)(c). It reaffirms the judiciary’s role in ensuring that penalties are imposed in a fair and just manner, adhering strictly to the provisions of the law.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 29.11.2022 passed for A.Y. 2016-17.
2. The assessee has taken four grounds of appeal. However, its grievances revolve around a single issue, namely ld. CIT(Appeals) has erred in confirming the penalty of 4,44,815/- imposed under section 271(1)(c) of the Income Tax Act.
3. The Counsel for the assessee has placed on record a paper book containing 44 pages. He pleaded that the addition on which this penalty has been computed, has been deleted by the ld. 1st Appellate Authority on the quantum appeal. Copy of the ld. CIT(Appeals)’s order dated 14.07.2020 passed on the assessment order dated 24.12.2018 passed under section 143(3) is available on pages no. 6 to 14 of the paper book.
4. The ld. D.R., on the other hand, was unable to controvert this fact.
5. On due consideration of the above facts, we are of the view that sub-clause (iii) of section 271(1)(c) provides a mechanism for computation of penalty. The penalty is to be computed on the basis of the addition made to the income of the assessee disclosed in the return filed under section 139(1). The penalty could be either equivalent to the taxes sought to be evaded by the assessee or maximum to the extent 300 times. Since the very foundation to compute the penalty is no more available after the decision of the ld. CIT(Appeals) on the assessment order, therefore, no penalty could be imposed upon the assessee. Accordingly, we allow this appeal of the assessee and delete the penalty.
6. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on April 27, 2023.
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