Penalty Under Section 271(1)(c) Deleted in Section 10(26BBB) Exemption Dispute — ITAT Dehradun Upholds CIT(A) Order Pending High Court Ruling
Case Overview
Case Name: ITO Vs Uttarkhand Poorv Sainik Kalyan Nigam Ltd.
Forum: Income Tax Appellate Tribunal (ITAT), Dehradun
Assessment Year: 2013–14
Relevant Provisions: Section 271(1)(c), Section 10(26BBB), Section 143(3), Section 147, Section 158A, Section 250 — Income Tax Act, 1961
Date of Order: 12.03.2026
Background of the Dispute
This matter came before the ITAT Dehradun in the form of an appeal filed by the Revenue, directed against the order dated 23.02.2018 passed by the Commissioner of Income Tax (Appeals), Dehradun ["CIT(A)"], under Section 250 of the Income Tax Act, 1961. The subject matter of the Revenue's challenge was the deletion of penalty that had originally been levied under Section 271(1)(c) of the Act vide penalty order dated 24.03.2017 for Assessment Year 2013–14.
At the heart of this case lies a claim for exemption made by the assessee — Uttarkhand Poorv Sainik Kalyan Nigam Ltd. — under Section 10(26BBB) of the Income Tax Act, 1961, a provision that grants exemption to income received by certain statutory corporations established for the welfare of former servicemen.
Assessment and Initiation of Penalty Proceedings
The reassessment in this case was concluded under Section 143(3) read with Section 147 of the Act on 25.02.2015. During the course of reassessment, the Assessing Officer (AO) examined the assessee's claim of exemption under Section 10(26BBB) and arrived at the conclusion that the assessee did not qualify as a statutory corporation entitled to claim the benefit of the said provision.
Consequently, the AO disallowed the exemption and treated the income that had been claimed as exempt as concealed income. On this basis, penalty proceedings were initiated against the assessee under Section 271(1)(c) of the Act on the grounds of concealment of income and/or furnishing of inaccurate particulars of income.
Subsequently, the penalty was formally levied vide order dated 24.03.2017, imposing a sum of ₹2,30,99,600/- — computed on the basis of the amount that had been claimed as exempt under Section 10(26BBB) and treated as concealed income by the AO.