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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Mahavir Singh & Shri Rajesh Kumar
O R D E R Per Mahavir Singh, Judicial Member
This appeal by revenue is arising out of the order of the CIT(A) – 27, Mumbai, in appeal No.CIT(A)-27/AC-16(2)/55/13-14 dated 28.08.2014. The assessment was framed by the ACIT 16(2), Mumbai, for A.Y. 2009-10 vide his order dated 10.12.2010 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act). The penalty under dispute was levied by the AO u/s. 271(1)(c) of the Act vide his order dated 26.03.2013.
The only issue in this appeal of the revenue is against the order of the CIT(A) deleting the penalty imposed by the AO u/s. 271(1)(c), for this the revenue has raised the following ground:
“On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty imposed u/s. 271(1)(c) of the I.T.Act prematurely after flowing his own decision in the assessee’s own case for A.Y. 2003-04 without appreciating the fact that in quantum appeal the issue of change of head of income has been sustained by the Hon’ble ITAT Mumbai and appeal of the assessee is pending in High Court for the A.Y. 2003-04 and appeal against cancellation of penalty u/s. 271(1)(c) for the A.Y. 2003-04 is pending before ITAT Mumbai.” Briefly stated facts of the case are that the AO during the course of assessment proceedings noticed that the trust was formed for the benefit of beneficiaries i.e. a discretionary trust. In this trust there were 100 trustees having one per share each in the income. During the course of assessment proceedings, it was noticed that the assessee has declared income under the head ‘income from other sources’ amounting to Rs.50,51,122/- and also claimed deduction of interest paid at Rs.50,01,484/- which was distributed equally among the 100 beneficiaries.
Accordingly, income was declared at nil. The AO added the claim of interest of Rs.50,01,484/- in view of the decision of ITAT in earlier year. The AO initiated penalty proceedings u/s. 271(1)(c) of the Act for furnishing of inaccurate particulars of income. The AO based on the decision of the order of CIT(A)-27, Mumbai in quantum, levied the penalty @100% of tax sought to be evaded. Accordingly, the penalty amounting to Rs.17,00,004/- was levied u/s. 271(1)(c) of the Act.
Aggrieved, the assessee preferred appeal before the CIT(A).
The CIT(A) deleted the penalty by relied on earlier years decision of the CIT(A) for A Ys 2003-04 and 2006-07 in appeal Nos. CIT(A)-27/ACIT16(2)/25/2011- 12 dated 31.07.2013 and CIT(A)-27/ACIT 16(2)/26/2011-12 dated 16.10.2012. The CIT(A) further relied on the decision of Hon’ble Bombay High Court in the case of CIT vs. Nayan Builders in I.T.Appeal No.415 of 2012, judgment dated 08.07.2014, wherein Hon’ble High Court has cancelled the penalty by stating that the quantum addition has been challenged before the Hon’ble High Court, which has been admitted and once quantum addition is admitted on a substantial question of law, the penalty cannot be sustained. Aggrieved, now the revenue is in appeal before the Tribunal.
We have heard rival contentions and have gone through the facts and circumstances of the case. Before us the learned counsel for the assessee stated that in this case the quantum appeal is admitted by Hon’ble High Court on a substantial question of law and once substantial question is admitted, learned counsel stated that the penalty will not survive in view of the decision of Hon’ble Bombay High Court in the case of Nayan Builders (supra). We find that this proposition is settled by Hon’ble Bombay High Court in the case of Nayan Builders (supra), wherein it is held that once the substantial question of law is admitted by Hon’ble High Court in quantum appeal, the penalty u/s. 271(1)(c) of the Act will not survive. We confirm t he order of the CIT(A) deleting the penalty.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on this day of 8th June 2016.