Commissioner of Income Tax vs Pradeep Banker

The present appeal filed u/s 260A of the income tax Act, 1961 (hereinafter referred to as "the Act") has been filed against the order dated July 28, 1999, passed by the income tax Appellate Tribunal, New Delhi in respect of the penalty proceedings u/s 271(1)(c) of the Act for the assessment year 1986-87. The appeal was admitted vide order dated September 20, 2004 on the following substantial question of law: Whether, on the facts and circumstances of the case, the Tribunal was legally justified in directing the Assessing Officer to initiate penalty proceedings in fresh assessment when the limitation for completion of fresh assessment already expired as on date of income tax Appellate Tribunal order ?

We have heard Sri A.N. Mahajan, learned standing counsel for the Department. Nobody is appearing on behalf of the respondent.

From a perusal of the order of the penalty, we find that penalty has been imposed on the ground that the cash credits recorded in the books of account of the respondent-assessee were not found explained satisfactorily and therefore, it was added towards the income of the assessee. Penalty of Rs. 20,000 was imposed u/s 271(1)(c) of the Act. The appeal preferred against the order dated May 4, 1990 has been allowed by the Commissioner of income tax (Appeals) which order has been upheld by the Tribunal. The Tribunal while dismissing the Revenue''s appeal has held that as in the quantum proceedings, the issue relating to addition which was a subject-matter of the present proceedings u/s 271(1)(c) has since been restored back to the file of the assessing authority for decision afresh, penalty imposed u/s 271(1)(c) does not survive. The Tribunal, however, gave the direction that the Assessing Officer shall be at liberty to initiate penalty proceedings afresh, if he so likes, when he frames the fresh assessment order.

From the perusal of the orders passed by the assessing authority as also the Tribunal, we find that the very basis on which the penalty was imposed u/s 271(1)(c) of the Act had already been set aside by the Tribunal in the quantum appeal and the matter was restored to the file of the Assessing Officer.

Thus, till such time fresh adjudication takes place, penalty imposed u/s 271(1)(c) of the Act on the basis of the earlier addition cannot be sustained and the Tribunal has correctly held so. We may mention here that from a reading of a question if the assessment has already become barred by limitation then there being no adjudication on the issue regarding addition of income, concealment cannot be treated to have been established. In view of the above observations, the appeal fails and is accordingly dismissed.