TRAVELPORT HOLIDAY (INDIA) PRIVATE LIMITED,MUMBAI vs. ITO WARD, 11(3)(1), MUMBIA

At the outset, the learned counsel for the assessee submitted that the very foundation upon which the impugned penalty order survives no longer exists, inasmuch as the quantum proceedings arising out of the very same assessment order have already been restored back to the file of the learned CIT(A) by the Coordinate Bench of the Tribunal for fresh adjudication. It was submitted that once the quantum additions themselves have been set aside for denovo adjudication, then the consequential penalty levied under section 270A cannot independently survive, because the substratum of the penalty proceedings itself has become uncertain and sub judice. He further submitted that the learned CIT(A), while confirming the penalty, proceeded on an erroneous factual premise that the

On merits also, it was contended that the additions made by the Assessing Officer were neither based on any finding of concealment nor on any positive material demonstrating deliberate misreporting of income as contemplated under section 270A(9). The additions relating to cash deposits arose due to non-acceptance of the explanation and alleged deficiency in supporting documentation, whereas the disallowance of business loss and long-term capital loss was made on account of non-appreciation or non-furnishing of certain documentary evidences. It was thus submitted that these issues, at best, pertain to appreciation of facts and evidences and cannot ipso facto lead to the conclusion that the assessee had indulged in “misreporting of income” within the meaning of section 270A(9). It was further submitted that there is no allegation or finding in the assessment order that the assessee had suppressed facts, recorded false entries, claimed fictitious expenditure, or deliberately failed to disclose income. Therefore, even otherwise, the levy of penalty under section 270A was wholly unjustified.

We have heard the rival submissions and perused the material placed on record. From the facts borne out from the records, it is an admitted position that the penalty proceedings under section 270A arise directly from the additions/disallowances made in the assessment order passed under section 147 read with section 144B, wherein additions on account of cash deposits under section 69A and disallowance of business loss and long-term capital loss were made. It is also not in dispute before us that the Coordinate Bench of the Tribunal, in the quantum proceedings arising from the very same assessment order, has already restored the entire matter back to the file of the learned CIT(A) for fresh adjudication. Thus, the quantum dispute itself is presently open and pending reconsideration before the appellate authority.

Once the very basis and foundation of the penalty proceedings, namely the quantum additions, have been restored back for fresh adjudication, then in our considered opinion, the consequential penalty proceedings cannot attain independent finality at this stage. Penalty proceedings are always incidental and consequential to the findings recorded in the quantum

Apart from the above, even on a prima facie consideration of the nature of additions involved, we find that the issues pertain to explanation of cash deposits and allowability of business loss and long-term capital loss, which essentially require proper appreciation of facts and examination of evidences. There is no categorical finding brought on record by the Assessing Officer that the assessee had indulged in suppression of facts, recording of false entries, claim of fictitious expenditure, or deliberate concealment of income so as to bring the case strictly within the ambit of “misreporting of income” contemplated under section 270A(9). Mere rejection of explanation or disallowance of claims by itself does not automatically warrant levy of penalty for misreporting, especially when the underlying additions themselves are subject matter of fresh adjudication before the appellate authority.

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