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The petitioner is a company engaged,inter alia, in the business of rendering software service. The return of income was selected for scrutiny and the 1st respondent passed a draft assessment order under s. 143(3) r/w s. 144C of the Act proposing to make disallowance under s. 14A of the Act and recomputed the deduction claimed under ss. 10A and 10AA of the Act. Aggrieved, the petitioner filed its objections before the DRP which rejected the objections of the petitioner. The first respondent passed the final assessment order in line with the directions issued by the DRP. Aggrieved, the petitioner and the Revenue preferred appeal/cross-appeal before the Tribunal. The Tribunal passed an order dismissing the Revenue’s appeal, partly allowing the petitioner’s appeal. However, the disallowance made under s. 14A of the Act and recomputation of deduction under ss. 10A and 10AA of the Act came to be upheld. Aggrieved, the petitioner has filed an appeal before this Courtwhich is pending consideration.

Shanti Prime Publication Pvt. Ltd.

Sec. 220 of Income-tax Act, 1961— Recovery—It was obligatory on part of AO to consider the application of petitioner staying demand of penalty subject to the decision of the Tribunal/appellate authority as the basis for levy of penalty is set aside by Tribunal.

Facts: The petitioner has assailed the order passed by the respondent No. 1 whereby the petitioner’s application for stay of the demand pursuant to the order passed by the respondent No. 1 under s. 271(1)(c) relating to the asst. yr. 2011-12 has been rejected, and the order passed by the respondent No. 2 rejecting the petitioner’s application for stay of the demand pursuant to the order passed by the respondent No. 1 inter alia seeking a direction to the respondents not to enforce the demand of Rs. 27,27,42,069 under the demand notice issued by the respondent No. 1 under s. 156 relating to the asst. yr. 2011-12 until disposal of the appeal filed by the petitioner relating to the assessment year in question pending before the Tribunal or the appeal filed by the petitioner challenging the order passed under s. 271(1)(c) before the CIT(A), whichever is later.

Held, that it is evident that the basis for the levy of penalty is set aside by the Tribunal i.e., the original order of the Tribunal relating to the disallowance made under s. 14A and recomputation of deduction under ss. 10A and 10AA by recalling the original order in Misc. Petn. No. 38/Bang/2019 and the same is pending adjudication before the Tribunal. The petitioner has filed an appeal against the order of penalty impugned herein and the said appeal is also pending consideration before the appellate authority. It is well settled law that the penalty is not automatic. In such circumstances, it was obligatory on the part of AO to consider the application of the petitioner staying the demand of penalty subject to the decision of the Tribunal/appellate authority. The same having been rejected, this Court deems it appropriate to direct the respondents not to enforce the demand relating to the penalty amount under the demand notice dt. 23rd April, 2019 issued by the respondent No. 1 under s. 156 relating to the assessment year in question until disposal of the proceedings pending before the Tribunal or the appellate authority challenging the order passed under s. 271(1)(c) whichever is earlier and is ordered accordingly. Writ petition stands disposed of. - SASKEN TECHNOLOGIES LTD. V/s JT. CIT - [2020] 313 CTR 725 (KARN)