DCIT v ARSS Developers Limited (ITAT Cuttack)

In the case of DCIT v ARSS Developers LimitedThe Income Tax Appellate Tribunal (ITAT) Cuttack has upheld the decision of the Commissioner of Income Tax (Appeals) (CIT(A)) to remove a penalty of ₹3,08,11,278 imposed in under section 271 (1) (c) of the Income Tax Act for the assessment year 2014-15. The revenue had filed an appeal against the CIT(A)’s decision, arguing that the decision was erroneous and that the CIT(A) had failed to consider an appeal pending before the Orissa High Court regarding the amount of addition linked to the case. However, the court determined that the sanction could not be sustained due to the absence of the underlying quantum addition, which had already been removed by the ITAT in a previous decision.

The court noted that the CIT(A) had rightly pointed out that the penalty proceedings could not be restarted merely because the revenue had filed an appeal against the increase in quantum. Since the increase in quantum no longer existed, the ITAT found no reason to interfere with the CIT(A)’s decision to remove the penalty. As a result, the revenue appeal was dismissed. This decision reinforces the principle that the penalties provided for in section 271(1)(c) cannot be imposed if the initial basis for the penalty, namely the addition of the quantum, has been eliminated. The decision emphasizes compliance with procedural standards and the importance of resolving underlying substantive issues before imposing tax sanctions.

SEO Title: ITAT confirms removal of penalty in DCIT vs ARSS developers

FULL TEXT OF THE ORDER OF ITAT CUTTACK

This is an appeal filed by the Revenue against the order of the ld CIT(A), Bhubaneswar-2 dated 25.6.2024 in Appeal No. NFAC/2013- 14/10055461 removing the penalty imposed u/271 (1)(c) of the Act of Rs.3,08,11,278/- for the assessment year 2014-15.

2. Shri Sanay Kumar, ld CIT DR appeared for revenue. None are represented on behalf of the insured. However, a request for adjournment was filed. Since the matter can be decided in the absence of the assessee, we reject the adjournment application and proceed to dispose of the revenue appeal.

3. The recipes aroused the following reasons:

1. The order of the ld CIT (A) is erroneous both in fact and in law.

2. Whether in view of the facts and circumstances of the case, the ld CIT(A) is justified in not considering the fact that the department has filed an appeal before the High Court of Orissa in ITA No. 06/2022 against the disputed quantum of addition in the case of the assessee for AT 2014015 and the same is pending judgment.

4. A perusal of the order of the ld CIT(A) shows that the ld CIT(A) has removed the penalty imposed under section 271(1)(c) of the Act on the ground that the ITAT has vided its order dated 23.12.2021, in the case of the assessee for the assessment year 2014-15, the quantum addition has been removed. The fact that the tax appeal is pending before the High Judicial Court concerning the increase in the amount does not justify the resumption of the sanction procedure. This being said, quantum addition no longer exists, we believe that the order of ld CIT(A) does not require any interference.

5. Accordingly, the revenue appeal is dismissed.

Order dictated and pronounced in public hearing on 9/23/2024.