Income Tax Appellate Tribunal (ITAT) Kolkata in a ruling, the case of Kalna II CADP Farmers Service Co-Op. Society Limited vs. ITO has set a crucial precedent concerning penalties under Section 271(1)(c) of the Income Tax Act. The decision tribunal, on April 27, 2023, emphasized that no penalty could be levied under this section if the addition, which formed the basis for calculating the penalty, has been deleted by the appellate authority.
Details Analysis in Case of CADP Farmers Service Co-Op. Society Limited
The core of the appeal before ITAT Kolkata is towards the penalty of Rs 4,44,815/- levied under Section 271(1)(c) of the Income Tax Act for the AY 2016-17. The taxpayer’s view was that the addition on which this penalty was calculated had been deleted by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in a previous order dated 14.07.2020.
On the investigation of the submissions and the corresponding lawful provisions the ITAT Kolkata followed that Section 271(1)(c)(iii) puts the process for calculating the contingent penalty as on the additions incurred to the income of the taxpayer as shown in the return furnished under section 139(1). As per section, the penalty can either be identical to the tax asked to be evaded or a highest of 300 times the mentioned amount.
Provided that the foundational ground for calculating the penalty, i.e., the addition to the income of the taxpayer, was no longer present following the CIT(Appeals)’s decision to delete the addition, ITAT Kolkata ruled that charging the penalty under Section 271(1)(c) was untenable. Therefore, the tribunal permitted the plea and ordered the deletion of the penalty.
Closure: The ITAT Kolkata’s ruling in favour of Kalna II CADP Farmers Service Co-Op. Society Limited furnishes an important reminder of the legal principles controlling the levy of penalties under the Income Tax Act.
The same decision highlights the condition for a substantial basis in the form of additions to the income of taxpayers for imposing penalties under Section 271(1)(c). It reaffirms the judiciary’s role in assuring that penalties are levied in a fair way complying with the provisions of the law.
| Case Title | Kalna II CADP Farmers Service Co-Op. Society Limited Vs. Income Tax Officer |
| Citation | I.T.A. No. 2/KOL/2023 |
| Date | 27.04.2023 |
| Appearances by | Shri Somnath Ghosh, Advocate, appeared on behalf of the Assesseee |
| Kolkata ITAT | Read Order |