VAREEN FINANCIAL SERVICES LTD. vs. CIT, PATIALA
What did the High Court hold?
The High Court held that the impugned order imposing penalty cannot be sustained in the eyes of law. The reasoning was based on the decision in the connected appeal, ITA No. 72 of 2004, where the Tribunal's addition of the notional income of ₹12,00,000/- was set aside. Since the underlying addition of income was nullified, there was no basis for imposing a penalty on that income. The ratio decidendi is that a penalty cannot be levied on income that has been deleted or set aside by a higher appellate authority. The High Court allowed the appeal and set aside the impugned order.
What were the facts?
The appeal was filed by Varren Financial Services Limited against the order of the Commissioner of Income Tax, Patiala. The High Court of Punjab and Haryana at Chandigarh was hearing ITA No. 77 of 2010. The High Court noted that in a connected appeal, ITA No. 72 of 2004, titled "M/s Varren Financial Services (P) Ltd., Patiala Vs. Commissioner of Income Tax, Patiala", the judgment of the Income Tax Appellate Tribunal had been set aside. This prior decision involved the addition of a notional income of ₹12,00,000/-. The present appeal was related to the imposition of a penalty on this additional income.
What were the issues?
1. Whether the impugned order imposing penalty on the additional income can be sustained in law, given that the addition of the notional income of ₹12,00,000/- was set aside in a connected appeal. Assessee's Contention: The assessee argued that since the notional income of ₹12,00,000/- was deleted by the High Court in a connected appeal (ITA No. 72 of 2004), there is no basis for imposing a penalty on that income. Therefore, the impugned order imposing penalty cannot be sustained. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in this particular appeal. However, the context implies the revenue would have supported the penalty order.
AI-generated summary — verify with the full judgment below
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.77 of 2010 (O&M) Date of decision: 21.02.2012 Varren Financial Services Limited ....Appellant Versus Commissioner of Income Tax, Leela Bhawan, Patiala ....Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE ALOK SINGH Present: - Mr. Ravi Shankar, Advocate, for the appellant. Ms. Savita Saxena, Advocate, for the respondent. 1.Whether to be referred to the Reporters or not? 2.Whether the judgment should be reported in the Digest? ***** ALOK SINGH, J. Since in connected ITA No.72 of 2004 titled “M/s Varren Financial Services (P) Ltd., Patiala Vs. Commissioner of Income Tax, Patiala”, we have set aside the judgment of the Income Tax Appellate Tribunal adding the notional income of ` 12,00,000/-, therefore, there is no question of imposing penalty on the additional income. Therefore, order impugned cannot be sustained in the eyes of law. Appeal stands allowed. Impugned order stands set aside. (M.M. Kumar) Judge (Alok Singh) Judge February 21, 2012 R.S.
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