MAMIDI USHA LAKSHMI KUMARI,HYDERABAD vs. ITO, WARD-9(1), HYDERABAD

Succinctly stated, the assessee in the present appeal has challenged the order of the CIT(A), wherein he has confirmed the penalty levied 4by the AO under Section 271(1)(c) of the Act, dated 29/09/2016.

Smt. Sandhya, Advocate, Ld. Authorized Representative (for short, “AR”) for the assessee, at the threshold of hearing, submitted that the quantum appeal arising out of the assessment order, on the basis of which the impugned penalty has been levied, is still pending adjudication before the learned CIT(Appeals). Elaborating on her contention, it was submitted that the penalty appeal ought not to have been disposed of by the CIT(A) before the disposal of the quantum appeal, since the outcome of the quantum proceedings would have a direct bearing on the levy of penalty.

Per Contra, the learned Sr. Departmental Representative (for short, “Sr. DR”) did not seriously dispute the factual position that the quantum appeal is pending before the learned CIT (Appeals).

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.

As stated by the Ld. AR, the quantum appeal relating to the additions forming the basis of the impugned penalty proceedings is still pending before the CIT(A). We find substance in the Ld. AR’s contention that as the penalty under Section 271(1)(c) of the Act is consequential to the additions made in the assessment order, and the sustainability of such penalty is dependent on the ultimate outcome of the quantum proceedings, therefore, the adjudication of the penalty appeal before the disposal of the quantum appeal is neither appropriate nor conducive to a proper and effective adjudication of the issues involved.

We further find that the CIT(A), while disposing of the impugned appeal, has himself noticed that the status of the quantum proceedings was not clear. We find that the CIT(A), in spite of recording such observation, has proceeded to adjudicate and confirm the penalty. In our considered view, the CIT(A) ought to have awaited the disposal of the quantum appeal before adjudicating the appeal against the penalty imposed under Section 271(1)(c) of the Act, as the findings recorded in the quantum proceedings would have a material bearing on the levy and sustainability of the penalty.

We, thus, in the facts and circumstances of the case, deem it appropriate to set aside the impugned order of the CIT(A) and restore the matter to his file with a direction to adjudicate the appeal relating to the penalty under Section 271(1)(c) of the Act afresh after the disposal of the quantum appeal. Needless to say, the CIT(A) shall in the course of the de novo proceedings afford the assessee a reasonable opportunity of being heard.

Before parting, we may herein observe that we have not expressed any opinion on the merits of the levy of penalty and all contentions available to both the parties are left open for consideration by the CIT(A) in accordance with the extant law.

In the result, the appeal of the assessee is allowed for statistical purposes.