M/S Key Corp Ltd., Kanpur vs Assessee

Appellant by: Shri. V. K. Pandey, Joint Secretary Respondent by: Shri. Harish Gidwani, D.R. Date of hearing: 24 04 2015 Date of pronouncement: 05 06 2015

ORDER

PER SUNIL KUMAR YADAV:

This appeal is preferred by the assessee against the order of the ld. CIT(A) confirming the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter called in short "the Act") at Rs.1.40 lakhs.

2. During the course of hearing, the A.R. of the assessee-corporation has invited our attention that the penalty was levied for the disallowance made under section 14A of the Act. He has further invited our attention that while computing the disallowance under section 14A of the Act, rule 8D of the rules was also invoked by the Assessing Officer; whereas for assessment year 2007-08 rule 8D of the rules cannot be invoked. If any disallowance is to be made, it can only be estimated and for estimation of disallowance, penalty under section 271(1)(c) of the Act cannot be levied.

3. The ld. D.R. has simply placed reliance upon the order of the ld. CIT(A).

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4. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that in quantum the addition was made on account of disallowance made under section 14A of the Act and the disallowance was computed under rule 8D of the rules. The assessment year involved is 2007-08 and it has been repeatedly held through various judicial pronouncements that rule 8D of the rules cannot be invoked for assessment year 2007-08 as it will be applicable from assessment year 2008-09. Therefore, disallowance ought to have been estimated instead of computing the disallowance as per rule 8D of the rules. Moreover, there was also debate at the relevant point of time with regard to the disallowance under section 14A of the Act. Therefore, we are of the view that for estimation of disallowance, penalty under section 271(1)(c) of the Act cannot be levied as there was neither concealment of income nor furnishing of inaccurate particulars of income. We accordingly set aside the order of the ld. CIT(A) and delete the penalty.

5. In the result, appeal of the assessee is allowed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:5th June, 2015 JJ:0605 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar