SHRI TAPESHWAR NATH,JAIPUR vs. INCOME TAX OFFICER, WARD-3-2, JAIPUR

At the outset, the ld. AR submitted that in this case, the assessment was completed u/s 147 read with 144 vide order dated 15.12.2015 wherein the AO has made an addition of Rs. 7,75,592/-. It was submitted that on appeal, the said addition has since been deleted by the ld. CIT(A) and therefore, where the addition have been deleted, there is no basis for levy of penalty. It was accordingly submitted that the penalty so sustained by the ld. CIT(A) may be deleted. 2 Sh. Tapeshwar Nath, Jaipur Vs. ITO, Ward 3(2), Jaipur 3. Per contra, the ld. DR is heard who has relied on the order of the lower authorities.

We have heard the rival submissions and perused the material available on record. In this case, we find that in absence of any return of income filed originally by the assessee u/s 139 or in response to notice u/s 148, the assessment was completed u/s 147 read with 144 wherein the AO has made an addition of Rs. 7,75,592/- based on ITS details available with the Department and penalty proceedings u/s 271(1)(c) were separately initiated and thereafter penalty order was passed u/s 271(1)(c) on 30.06.2016 levying penalty of Rs 187130/- which has been confirmed by the ld CIT(A), Alwar vide his order dated 26.02.2019. However, the quantum appeal of the assessee was pending adjudication before ld CIT(A)-1, Jaipur who vide his order dated 02.05.2019 has allowed partial relief to the assessee.

The ld. CIT(A) in his order dated 02.05.2019 noted that the assessee has submitted a computation of income wherein he has shown salary income of Rs. 1,34,661/- and profession receipt of Rs. 6,40,937/- totaling to total receipts of Rs. 7,75,592/-. Further, against the profession receipts, the assessee has claimed expenses of Rs. 5,18,337/-. A remand report was called for from the AO wherein the AO has objected to the salary expense of Rs. 2,45,000/-. Thereafter, the ld CIT(A) has considered the salary expense reasonable and given the following findings which reads as under:- “(v) In the remand report, the AO accepted the claim of all expenses except salary expenses amounting to Rs. 2,45,000/-. It was contended by the appellant that he is running pathology centre and the salary has been paid to Shri Madhav Patel, accountant and Shri Naresh Gupta, technician. It was further submitted that without the help of accountant and technician, the pathology centre cannot be run. Seeing the quantum of salary claimed on monthly basis and also considering the need of the business, these expenses are considered as reasonable and no 3 Sh. Tapeshwar Nath, Jaipur Vs. ITO, Ward 3(2), Jaipur disallowance is justified. The AO is directed to recompute the income after allowing the benefit of expenses claimed. ”

We therefore, find that the ld. CIT(A) has accepted the claim of the expenses amounting to Rs. 5,18,337/- against profession receipts of Rs. 6,40,937/- and the matter was remanded to the AO to re-computation the income after allowing the benefit of expenses claimed. We find that the recomputed income would consist of salary income of Rs. 1,34,661/- as well as net profession receipt amounting to Rs. 1,22,600/- which would still be taxable in the hands of the assessee. Therefore, it is not a case where the whole additions of Rs 775,592 has been deleted by the ld CIT(A) and therefore, no consequent penalty can be levied. We accordingly set aside the matter to file of the AO to re-compute the penalty consequent to re-computation of income as per the directions of the ld. CIT(A).