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Facts
The assessee claimed a weighted deduction of Rs. 17.50 lakhs under Section 35(1)(iii) for a Rs. 10 lakh donation. An investigation revealed that the donation was subsequently returned to the assessee, leading the AO to disallow the deduction and impose a penalty of Rs. 5,40,750/- under Section 271(1)(c), which was confirmed by the CIT(A).
Held
The Tribunal quashed the penalty order, finding that the Assessing Officer (AO) passed the penalty order on 17.03.2020, which was before receiving the mandatory approval from the Joint Commissioner of Income Tax (JCIT) on 18.03.2020, as required by Section 274(2) of the Act. This rendered the penalty order without proper authority.
Key Issues
Whether a penalty order passed by the AO under Section 271(1)(c) is legally valid if it is issued before obtaining the mandatory approval from the JCIT as stipulated by Section 274(2) of the Income Tax Act.
Sections Cited
35(1)(iii), 271(1)(c), 274(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: JUSTICE (RETD.) C V BHADANG, HON’BLE& SHRI B.R. BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER :
The assessee has filed this appeal challenging the order dated 29-01- 2024 passed by Ld CIT(A), NFAC, Delhi for assessment year 2013-14 confirming the penalty levied by the AO u/s 271(1)(c) of the Act.
The facts relating to the same are discussed in brief. The assessee has paid a donation of Rs.10.00 lakhs to School of Human Genetics and Population Health, Kolkatta and claimed weighted deduction of Rs.17.50 lakhs calculated @ 175% of the donation amount u/s 35(1)(iii) of the Act. Subsequently, the investigation department of the Income tax found out that the above said organization was returning back the donation amounts
ITA NO.1022/MUM/2024 Assessment Year 2013-14
outside the books in cash. Upon receipt of the said information, the AO disallowed the claim of Rs.17.50 lakhs made by the assessee u/s 35(1)(iii) of the Act. Though the assessee challenged the above said disallowance by filing appeal before ld CIT(A), yet he withdrew the appeal subsequently accepting the addition made. Later the AO imposed penalty of Rs.5,40,750/- u/s 271(1)(c) of the Act. The Ld CIT(A) also confirmed the same. Aggrieved, the assessee has filed this appeal.
The Ld A.R submitted that, as per the provisions of sec. 274(2) of the Act, the Assessing Officer is required to obtain the approval of the Joint Commissioner of Income tax (JCIT) before imposing penalty. He furnished a copy of approval dated 18-03-2020 granted by the JCIT. He submitted that the AO has, however, passed the impugned penalty order on 17-03-2020 mentioning that the approval has been obtained from JCIT on 16-03-2020. He submitted that the above said facts would show that the AO has passed the impugned penalty order before receipt of approval from JCIT and accordingly contended that the impugned penalty order is liable to be quashed.
He further submitted that identical disallowance made in other cases has been deleted by the ITAT and Hon’ble High Court of Calcutta. In this regard, he referred to the decision rendered by Mumbai bench of Tribunal in the case of Kitchen Essentials vs. ACIT (ITA No.6672 & 6673/Mum/2013 dated 15.01.2019) and also the decision rendered by Hon’ble High Court of Calcutta in the case of PCIT vs. Maco Corpn. (India) P Ltd (2022)(144 taxmann.com 39)(Cal). He submitted that the impugned disallowance is liable to be deleted as per the above said decisions, since it is not established in the instant case also that the assessee has connived with the scheme of arrangement between concerns. Accordingly he submitted that the penalty is liable to be deleted on merits also.
The Ld D.R, however, supported the order passed by Ld CIT(A).
3 ITA NO.1022/MUM/2024 Assessment Year 2013-14
Under the provisions of sec.274(2), the AO is required to obtain approval from JCIT before passing the penalty order u/s 271(1)(c) of the Act. From the submissions made by Ld A.R, it is established that the impugned penalty order has been passed prior to the receipt of approval from JCIT, i.e., the impugned penalty order has been passed on 17.3.2020, while the approval has been given by JCIT on 18.3.2020. Hence the AO has passed the impugned penalty order without authority and hence the same is liable to be quashed on this legal ground.
Accordingly, we quash the impugned orders passed by the tax authorities. Since we have quashed the impugned penalty order on legal ground, we do not find it necessary to address the grounds urged on merits.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 20th June, 2024. Sd/- Sd/- [Justice (Retd) C V Bhadang] (B.R. Baskaran) President Accountant Member Mumbai, Date : 20th June, 2024 VM. Copy to : 1) The Appellant 2) The Respondent 3) The PCIT/CIT concerned 4) The D.R, “F” Bench, Mumbai 5) Guard file
By Order
Dy./Asstt. Registrar I.T.A.T, Mumbai