BABITA DEVI KANORIA,RANIGANJ vs. I.T.O.,WARD-3(1), ASANSOL

Assessment Year: 2010-2011 Babita Devi Kajoria, Raniganj 2. The assessee has taken three grounds of appeal, but her grievances revolve around a single issue, namely ld. CIT(Appeals) has erred in confirming the penalty of Rs.3,09,766/-, which was imposed by the ld. Assessing Officer under section 271(1)(c).

Brief facts of the case are that the assessee has filed her return of income on 31.12.2010 declaring total income at Rs.1,78,550/-. It is not discernable from the impugned assessment order, whether any scrutiny assessment had earlier taken place or not but 148 notice issued on 29.03.2017, which according to the ld. Assessing Officer was served upon the assessee. Thereafter he passed an assessment order under section 144 read with section 148 of the Income Tax Act according to his best judgment. It is a very brief assessment order, therefore, we take note of the complete finding available in this assessment order, which reads as under:- “Assessment Order The assessee filed his Income Tax Return on 31/12/2010 declaring total income at Rs.1,78,550/- for the AY 2010-11. The return was selected for escaped assessment within the meaning of section 14? of the Income Tax Act, 1961 for the A,Y. 2010-11 and notices u/s 148 of the IX Act, 1961 was issued on dated 29/03/2017 and duly served upon die assesses. However, no return has been filed by the assesses in response to the notice u/s 148 of the I.T. Act}1961, Again, letters were issued on 17/07/2037, 11/09/2017 and 27/11/2017 for necessary compliance. However, no compliance has been made. Sufficient time & opportunities were allowed to the assesses. However, no compliance has been made by die assessee so far. Under this circumstance, assessment is being made in this case u/s 144 of the 1.T.Act, 1961,

According to the assessee, the notice was not served upon her and, therefore, for a quite long period, quantum appeal was not filed before the ld. 1st Appellate Authority. When penalty was imposed on 17.05.2018 and it was served upon the assessee, only then she came to know that assessment proceeding has taken against her and she filed a letter dated 13.06,.2018 for supply of necessary papers. A copy of such letter is available at page no. 9 of the paper book. It appears that thereafter some quantum appeal has been filed, which is stated to Assessment Year: 2010-2011 Babita Devi Kajoria, Raniganj be pending before the ld. 1st Appellate Authority. For buttressing this argument, ld. Counsel for the assessee drew our attention towards page no. 32 of the paper book, where correspondence with Faceless Appellate Authority is available. It is pertinent to note that ideally an appeal arising from penalty order is to be decided after finalization of the quantum proceedings, because sub-clause (iii) of Section 271(1)(c) provides a mechanism for quantification of the penalty, which is dependent upon the total additions made to the declared income of the assessee and, therefore, unless a quantum proceedings attained finality, penalty appeals ought to have not been decided by the Appellate Authority. This practice or embargo is not applicable on the ld. Assessing Officer for visiting the assessee with penalty but after passing the penalty order, the Appellate Authority, i.e. CIT(Appeals) or ITAT ought to have waited completion of the quantum proceeding at appellate level.

However, after going through the record available before us, we deem it appropriate to adjudicate this appeal without getting ourselves influenced of the quantum proceedings pending before the lower Appellate Authority. We are assigning the reasons for this in the subsequent part of this order.

A perusal of the above reason would reveal that assessment of the assessee was reopened for excess claim of loss amounting to Rs.4,64,800/- but no addition of this amount has been made in the assessment order. The addition available in the assessment order is of Rs.11,53,930/-. We have extracted the complete

The Hon’ble Bombay High Court in the case of CIT – vs.- Jet Airways reported in 331 ITR 236, Hon’ble Delhi High Court in the case of Ranbuxy Laboratories reported in 336 ITR page 136 and Hon’ble Gujarat High Court in the case of Md. Juned reported in 353 ITR page 172 propounded unanimously that unless an addition is being made in a reassessment order on an item for which assessment was reopened, no other item can be added. In other words, in the present case, assessment was reopened for claiming excess loss of Rs.4,64,800/-, whereas addition of Rs.11,53,930/- has been added as a Assessment Year: 2010-2011 Babita Devi Kajoria, Raniganj profit of the assessee on transactions with NMCE. This quantum addition in itself ought to have not been made and might be deleted in the appellate proceedings. In such situation, it is not desirable that penalty should continue upon the assessee.

Apart from the above, ld. Counsel for the assessee has brought to our notice the defects in the penalty proceedings. He drew our attention towards pages no. 4, 5 & 6. At page no. 4 is first show-cause notice issued by the ld. Assessing Officer on 12.12.2017. In the heading of the notice, ld. Assessing Officer has observed that - “whereas in the course of proceedings before me for the assessment year 2010-11, it appears to me that you:” Thereafter he narrated certain circumstances and then observed as under:- “have concealed the particulars of your income against assessment year 2015-16 or furnished inaccurate particulars of such income”.

A perusal of the above correspondence would suggest that there is inherent contradiction in the issues of a charge-sheet upon the assessee for which she was required to defend herself. In the title of the show-cause notice, assessment year is mentioned as A.Y. 2010-11, whereas in the body of the notice for which assessee was required to explain her position, the assessment year is mentioned as A.Y. 2015-16. Thus there is no specific

The ld. D.R., however, on the other hand, submitted that a re-assessment order was passed determining the taxable income in the hands of the assessee. In the title of the show-cause notice, correct Assessment Year has been mentioned but in the subsequent part A.Y. 2015-16 has been noted by the ld. Assessing Officer, which can be a typographical error and should not be construed as fatal to the proceedings.

We have duly considered the objections raised by the ld. D.R. but we are not impressed upon by his submissions. There is no application of mind at the end of the ld. A.O. either in the assessment order or in the penalty proceedings. He has not categorically proved that assessee has concealed the income or furnished the inaccurate particulars. As observed above, there is an inherent contradiction even for opening of the assessment, vis-a-vis ultimate additions made in the hands of the assessee. On this strength of the Hon’ble three High Courts’ decision, this addition itself would not be sustainable though the issue is not before us and we cannot express our opinion about that in the present proceedings, but we can take cognizance of this fact for absolving the assessee from levy of penalty under section 271(1)(c) of the Income Tax Act.

In view of the above, the appeal of the assessee is allowed. The order of the ld. CIT(Appeals) as well as the penalty order are quashed.