Follow Us :

Case Law Details

Case Name : Kalna II CADP Farmers Service Co-Op. Society Limited Vs ITO (ITAT Kolkata)
Appeal Number : I.T.A. No. 2/KOL/2023
Date of Judgement/Order : 27/04/2023
Related Assessment Year : 2016-17

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.

ITAT Kolkata Decision Penalty Section under 271(1)(c) Deleted

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.

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
April 2024
M T W T F S S
1234567
891011121314
15161718192021
22232425262728
2930