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2024 (4) TMI 1027 - ITAT AHMEDABADLevy of penalty u/s 271(1)(c) - Denial of exemption of capital gains u/s 10(38) on account of sale of shares - company was not doing substantial business and not declaring dividend and accordingly disallowed the claim of exemption - penalty deleted by Ld. CIT(A) on the ground that since the issue in quantum proceedings has been decided in favour of the assessee by Hon’ble ITAT - HELD THAT:- It is a well settled law that once the additions made in quantum proceedings have been deleted, then there is no question of sustaining levy of penalty u/s 271(1)(c) of the Act. In the case of CIT v Shah Alloys [2012 (9) TMI 957 - GUJARAT HIGH COURT] the Gujarat High Court held that penalty need not be imposed when addition made, which was basis for penalty, was set aside. Also In the case of CIT v. Shishpal [2001 (9) TMI 41 - RAJASTHAN HIGH COURT] addition was made as unexplained investment under Section 69 and penalty was imposed under Section 271(1)(c).The aforesaid addition was deleted in quantum appeal. The High Court held that since the very foundation for imposition of penalty had become non-existent, penalty would not survive. Also in case of LRs Management. [2023 (5) TMI 351 - ITAT RAJKOT] it was held that Where quantum addition made by AO was deleted by Tribunal, there remained no basis for levy of penalty under Section 271(1)(c) of the Act. Thus once the quantum proceedings itself have been decided in favour of the assessee, there is no scope of levy of penalty under Section 271(1)(c) of the Act, we are here by dismissing the appeal filed by the Department.
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