When order in quantum has been decided in favour of assessee penalty cannot be levied u/s 271(1)(c)

Brief Facts

The assessee, an educational society, filed its Income tax Return at a Nil income being exempt u/s 10(23C)(iiiad). The assessment in this case was completed in the status of AOP u/s 143(3) / 147 and certain additions were made in the assessment order passed. Thereafter, AO also imposed penalty u/s 271(1)(c) on the ground of furnishing of inaccurate particulars of income.

Tribunal had deleted the additions made in the assessment order passed u/s 143(3) / 147 and Deptt went in the High Court against the order of Tribunal

Decision by Delhi Tribunal

As this appeal was filed by Revenue, no one was present for argument on behalf of the Assessee; Delhi Tribunal decided the appeal ex-parte. Tribunal held that since the appeal in quantum has already been decided in favour of the assessee there is no scope for penalty to be levied u/s 271(1)(c) and upheld the decision of CIT(A) of deleting the penalty in both the assessment years i.e. 2002 – 03 and 2003 – 04

Comments by author

Similar view was taken by various High Courts as well: –

1. CIT Vs Bedi & Co (P) Ltd 183 ITR 59 [Kar], further, SC rejected SLP filed by Deptt as reported in 181 ITR St. 19;
2. ACIT Vs Badri Prasad Kashi Prasad 200 ITR 206 [All];
3. CIT Vs G Krishnan 210 ITR 707 [Mad];
4. CIT Vs Associated Transport (P) Ltd 212 ITR 417 [Cal];
5. City Dry Fish Co. Vs CIT 238 ITR 63 [AP];

Further, though in these case the appeal in quantum was decided in favour of the assessee and thereby penalty u/s 271(1)(c) was deleted, there are also cases where the appeal in quantum was decided by Tribunal against the assessee and the appeal was pending before High Court for disposal but High Court had admitted the appeal, even in that case, it was decided by Delhi Tribunal that penalty u/s 271(1)(c) cannot be levied being debatable issue [ITA No 1704, 1705/Del/2010, date of order 08.04.2011]