Commissioner of Income Tax vs Faqeer Mohd. and Sons

Satish Chandra, J.—All the three appeals have been filed u/s 260(A) of the Income Tax Act, 1961 for the assessment year 1985-86 against the consolidated order passed by the Income Tax Appellate Tribunal (ITAT) on 16th April, 1999 in I.T.A.Nos. 109, 107 and 108/Allahabad/92 wherein the Tribunal has cancelled the levy of different penalties imposed u/s 271(1)(c); 273(2)(b) and 273(2)(c) of the Income Tax Act, 1961.

The brief facts of the cases are that the assessee firm M/s Faqir Mohd. & Sons, Lucknow was engaged in the manufacture and sale of tobacco. For the Assessment Year under consideration i.e. 1985-86 u/s 143(3) of the Act, the Assessing Officer made an addition of Rs. 13,30,444/-. The Assessee filed an appeal before the First Appellate Authority who has deleted the entire addition. Not being satisfied, the Department filed second appeal before the Tribunal. The Tribunal vide its order dated 9th July, 1990 reversed the order of the first Appellate Authority and restored back the matter to the Assessing Officer for making fresh assessment as per the directions given in the order. In pursuance of the directions, the Assessing Officer made a fresh assessment on 31.1.1991 and again made an addition of Rs. 25,23,430/-. The Assessee made an application before the Tribunal to recall its order dated 9th July, 1990 for the reason that in consequence of its order, the income of the Assessee has been enhanced as per computation dated 31.1.1991, which power did not possessed by the Tribunal.

The Tribunal vide its order dated 3.5.1991 u/s 254 of the Act, recalled its previous orders dated 9.7.1990 and deleted some addition. Being aggrieved by the said order of the Tribunal, the Department filed a Reference Application u/s 256(1) of the Act which was rejected by the Tribunal vide order 20.1.1992. Against this order, the Department filed a Reference Application u/s 256(2) before this Court at Allahabad. This Court vide its order dated 25.9.1993 directed the Tribunal to refer the question of law for its opinion which was referred by the Tribunal vide its order dated 19.11.1993. In the meantime, the Tribunal vide its order dated 9.6.1997 has also deleted the remaining addition pertaining to the extra net profit; and unexplained investment. The Department again filed a Reference Application u/s 256(1) of the Act which was rejected by the Tribunal vide order dated 6.7.1998 (R.A. 303/Allahabad/97). The Department again filed a Reference u/s 256(2) before the High Court which was unanswered by the High Court in Income Tax Reference No. 171 of 1993 on 8.11.2005.

With this background, we have heard Sri D.D.Chopra for the appellant and Sri P.N.Batham for respondent and have also gone through the record.

From the record, it appears that, in quantum appeal, the entire addition was deleted by the Tribunal which was upheld by the High Court. When no addition sustained in the quantum appeal, then the levy of penalties is not desirable. Hence, all the three penalties were rightly cancelled by the ITAT. By keeping in mind the ratio laid down by the Apex Court in the case of Sudarshan Silks and Sarees Vs. Commissioner of Income Tax, Karnataka, we do not find any reason to interfere with the order of the Tribunal dated 16.4.1999 whereby the entire penalties were cancelled.

In the result, all the three appeals filed by the Department are dismissed. No order to costs.