ACIT-15(1)(2),MUMBAI , MUMBAI V. HCC INFRASTRUCTURE COMPANY LIMITED, MUMBAI

ITA 6111/MUM/2025

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The case involves appeals by the Assistant Commissioner of Income Tax against HCC Infrastructure Company Ltd. concerning penalties levied under section 270A for the assessment years 2017-18 and 2018-19. The penalties were based on disallowances made under section 14A read with Rule 8D, which were later deleted by the Tribunal in a quantum appeal. The Revenue challenged the deletion of these penalties, arguing that the matter was still under litigation and the penalties were consequential to the quantum additions. However, the Tribunal found that since the disallowances were removed, the penalties could not stand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788014 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 29-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: HASMUKH RAVARIA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 142(1); 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.6110/MUM/2025 ITA No.6111/MUM/2025 (Assessment Year 2017-18) (Assessment Year 2018-19) Assistant Commissioner of Income Tax – 15(1)(2), 126B, 1st Floor, Aaykar Bhavan, M.K. Road, Mumbai – 400020 PAN: AACCH5516M ............... Appellant v/s HCC Infrastructure Company Ltd., Hincon House Lbs Marg, Vikhroli, Mumbai - 400083 ……………… Respondent Assessee by : Shri Hasmukh Ravaria Revenue by : Shri Ritesh Misra, CIT-DR Date of Hearing – 25/11/2025 Date of Order - 27/11/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeals against the separate impugned orders of even date 04.07.2025, passed under section 250 of the Income Tax Act, 1961 (\"the Act\") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], which in turn arose from the penalty orders passed under section 270A of the Act, for the assessment years 2017-18 and 2018-19. Printed from counselvise.com ITAs No.6110 & 6111/Mum/2025 (A.Ys. 2017-18 & 2018-19) 2 2. Since both the appeals pertain to the same assessee involving similar issues arising out of a similar factual matrix, these appeals were heard together as a matter of convenience and are being decided by way of this consolidated order. With the consent of the parties, the Revenue’s appeal for the assessment year 2017-18 is considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to the Revenue’s Appeal for the assessment year 2018-19. 3. As the Revenue has raised similar grounds in both the appeals, the grounds raised by the Revenue in its appeal for the assessment year 2017-18 are reproduced hereunder for ready reference: - “a) Whether, on the facts and in the circumstances of the case and in law, the La. CIT(A) erred in deleting the penalty of Rs.5,50,05,704 / - levied under Section 270A of the Income Tax Act, 1961, without appreciating that the basis for the said penalty that the quantum addition was still under challenge and pending before the Hon'ble High Court. b) Whether, on the facts and in the circumstances of the case and in law, the Id. CIT(A) failed to appreciate that the deletion of the penalty was premature, as the penalty is consequential to the quantum addition and penalty's sustainability is contingent upon the final outcome of the quantum appeal filed by the Revenue before the Hon'ble High Court. c) Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not holding that the assessee's under-reported income, to the tune of Rs. 8,60,51,556/-, was a result of misreporting, as established in the original assessment order, which was confirmed by the CIT(A) in the quantum appeal and the subsequent ITAT order, which is under appeal, does not erase the initial finding of misreporting. d) Whether, on the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A) is bad in law and facts, as the penalty for under- reporting of income due to misreporting should have been sustained pending the final decision of the Hon'ble High Court on the quantum addition.” 4. The solitary grievance of the Revenue is against the deletion of the penalty levied under section 270A of the Act. Printed from counselvise.com ITAs No.6110 & 6111/Mum/2025 (A.Ys. 2017-18 & 2018-19) 3 5. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is engaged in the business of infrastructure development on a BOT basis. For the assessment year 2017-18, the assessee filed its return of income on 30.10.2017, declaring a total loss of Rs.168,15,93,648/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has made investments in its subsidiary company and has not voluntarily made any disallowance under section 14A of the Act in respect of expenditure incurred in relation to income which does not form part of the total income. The Assessing Officer (“AO”) vide order dated 17.12.2019 passed under section 143(3) of the Act, after considering the submissions of the assessee, made a disallowance of Rs.8,60,51,556/- under section 14A of the Act after applying the provisions of Rule 8D of the Income Tax Rules, 1962 (“the Rules”). In an appeal before the learned CIT(A), the disallowance made under section 14A read with Rule 8D of the Rules was upheld. However, in further appeal before the Tribunal, the Coordinate Bench of the Tribunal vide order dated 05.07.2023 passed in ITAs No.1220 and 1222/ Mum/2023 for the assessment years 2017-18 and 2018-19 deleted the disallowance made under section 14A read with Rule 8D of the Rules on the basis that in the year under consideration no exempt income was claimed by the assessee. 6. Meanwhile, vide penalty order dated 26.03.2024 passed under section 270A of the Act, the AO levied a penalty of Rs.5,50,05,700/- on the basis that Printed from counselvise.com ITAs No.6110 & 6111/Mum/2025 (A.Ys. 2017-18 & 2018-19) 4 assessee has under reported its income in consequence of misreporting of income to the tune of Rs.8,60,51,556/-. 7. During the appellate proceedings before the learned CIT(A), the assessee furnished a copy of the decision of the Coordinate Bench of the Tribunal in its own case in quantum appeal for the assessment years 2017-18 and 2018-19, whereby the disallowance made under section 14A read with Rule 8D of the Rules was deleted. The learned CIT(A), vide impugned order, after considering the decision of the Coordinate Bench of the Tribunal in quantum appeal, held that as a disallowance made in the quantum order has been deleted by the Tribunal, as a natural corollary, the penalty imposed under section 270A in respect of said disallowance cannot survive. Accordingly, the learned CIT(A) allowed the assessee's appeal. The relevant findings of the learned CIT(A) vide impugned order, are reproduced as follows: - “6.1. The grounds of appeal raised by the appellant, the statement of facts submitted and the other documents submitted are carefully examined. It is seen from the decision of ITAT Mumbai in the case of the appellant in ITA No. 1220/Mum/2023 dated 05.07.2023, that the disallowance u/s 14A, in respect of which penalty u/s 270A was levied for this assessment year, has been deleted by the Hon'ble ITAT by holding that no disallowance u/s 14A could be made if no exempt income was earned by the assessee during the relevant previous year. The appellant has also mentioned in the statement of facts that the appellants had erroneously not mentioned the ITAT order during the penalty proceedings., Since, the disallowance made in the quantum order has been deleted by the ITAT, as a natural corollary, the penalty imposed u/s 270A of the Income Tax Act, 1961 in respect of the said disallowance cannot survive and therefore the appeal against the penalty levied u/s 270A of the Act is hereby allowed.” 8. Having considered the submissions of both sides and perused the material available on record. Since the very basis on which the penalty under section 270A was levied has been deleted by the Coordinate Bench of the Printed from counselvise.com ITAs No.6110 & 6111/Mum/2025 (A.Ys. 2017-18 & 2018-19) 5 Tribunal in quantum appeal for the assessment years 2017-18 and 2018-19 in the assessee’s own case, we are of the considered view that the impugned penalty has been rendered non-sustainable. Accordingly, the impugned order passed by the learned CIT(A) deleting the penalty is upheld. As a result, the grounds raised by the Revenue in its appeal for the assessment year 2017-18 are dismissed. 9. As in the appeal for the assessment year 2018-19, the penalty under section 270A of the Act was also levied on the basis of disallowance made under section 14A read with Rule 8D of the Rules, which has been deleted by the Coordinate Bench of the Tribunal in quantum appeal, we are of the considered view that the learned CIT(A) has rightly deleted the penalty vide impugned order. As a result, the grounds raised by the Revenue in its appeal for the assessment year 2018-19 are dismissed. 10. In the result, both the appeals by the Revenue are dismissed. Order pronounced in the open Court on 27/11/2025 Sd/- Sd/- OM PRAKASH KANT ACCOUNTANT MEMBER S Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/11/2025 Prabhat Printed from counselvise.com ITAs No.6110 & 6111/Mum/2025 (A.Ys. 2017-18 & 2018-19) 6 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "