Initiation of Penalty Proceedings is illegal if VAT Paid Before Due Date of Filing ITR: ITAT

The Assessee had filed a return declaring an income of Rs. 15,83,910. During the course of assessment proceedings, the AO had noticed that the Assessee had debited sales tax (VAT) of Rs. 3,84,986 to his P&L Account. As per the AO, the appellant had failed to pay the same amount on or before the due date for furnishing his return for the previous year. Therefore, disallowance of Rs.3,84,986, had been made u/s 43B of the Act. The AO had also initiated penalty proceedings 271(1)(c) of the I.T. Act for furnishing inaccurate particulars of income by the appellant.

Appeal before CIT(A): Aggrieved by the order passed u/s 271(1)(c) of the Act, the Assessee has preferred the appeal before the Ld. CIT(A) and the Ld. CIT(A) dismissed the appeal by confirming the penalty order passed u/s 271(1)(c) of the Act.

Appeal before ITAT: Aggrieved by the same, the assessee has preferred the present appeal. It was observed by the tribunal that the assessee has paid VAT of Rs. 3,84,986 before the due date of filing the return, thus, there is no loss to the revenue. Also, the assessee has not taken the benefit of the same in the subsequent years. Therefore, the penalty proceedings deserve to be set aside. Accordingly, it allowed the grounds of appeal and set aside the penalty order passed by the AO which has been confirmed by the Ld. CIT(A). Hence, the appeal filed by the Assessee was allowed.

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