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Facts
The assessee, United Mediscribe P Ltd, appealed against penalty orders passed under Section 271(1)(c) of the Income Tax Act for A.Ys. 2011-12 and 2012-13, which were levied on additions made for interest income on FDRs. The CIT(A) had previously set aside the original assessment orders (passed under Section 144 r.w.s. 147) for fresh adjudication by the Assessing Officer.
Held
The Tribunal held that once the quantum assessment orders, which were the basis for imposing the penalty, have been set aside by the CIT(A) for fresh assessment, the penalty orders under Section 271(1)(c) cannot legally stand. Therefore, the Tribunal set aside the penalty levied for both years and remanded the matter to the Assessing Officer for reconsideration based on the final outcome of the quantum appeal.
Key Issues
Whether penalty imposed under Section 271(1)(c) for concealment of income remains valid if the underlying quantum assessment order is subsequently set aside by the appellate authority for de novo assessment.
Sections Cited
271(1)(c), 147, 144, 275
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Income Tax Appellate Tribunal, Hyderabad ‘ SM-B ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Madhusudan Sawdia
ORDER Per Bench: These two appeals by the assessee are directed against the two separate orders both dated 24/01/2025 of the learned CIT (A)-NFAC Delhi, for the A.Ys.2011-12 & 2012-13 respectively, arising from the penalty order passed u/s 271(1)(c) of the Act.
The assessee has raised identical grounds in these appeals. The grounds raised for the A.Y 2011-12 are reproduced as under:
At the time of hearing, the learned AR of the assessee has submitted that the Assessing Officer has levied the penalty
Page 2 of 6 u/s 271(1)(c) of the Act in respect of the addition on account of interest income on FDR for these two A.Ys. He has pointed out that in the quantum appeals, the learned CIT (A) has set aside the matter to the record of the Assessing Officer for fresh adjudication and therefore, the penalty levied u/s 271(1)(c) of the Act would not survive. He has filed the copies of the order of learned CIT (A) in the appeals filed against the assessment order and submitted that once the order passed by the Assessing Officer u/s 144 r.w.s. 147 has been set aside by the learned CIT (A) for fresh assessment, then penalty levied u/s 271(1)(c) of the Act ought to have been deleted by the learned CIT (A). Thus, the learned AR has pleaded that the impugned orders of the learned CIT (A) are liable to be set aside and the matter may be remanded to the record of the Assessing Officer for fresh consideration as per the outcome of the remand proceedings in quantum appeal.
On the other hand, the learned DR has relied upon the orders of the learned CIT (A).
We have considered the rival submissions as well as relevant material available on record. As it is manifest from the record that the Assessing Officer has levied penalty u/s 271(1)(c) of the Act in respect of the additions made on account of interest income on FDR for these 2 A.Ys. The said addition made by the Assessing Officer while passing the order u/s 144 r.w.s. 147 for the A.Ys 2011-12 and 2012-13 were challenged before the learned
Page 3 of 6 CIT (A). The learned CIT (A) vide two separate orders both dated 20/01/2025 set aside the orders passed by the Assessing Officer u/s 144 r.w.s. 147 in Para 6.67 for the A.Y 2011-12 and 6.7 for the A.Y 2012-13 as under: A.Y 2011-12 A.Y 2012-13
Thus, the order of the Assessing Officer passed u/s 144 r.w.s. 147 have been set aside by the learned CIT (A) with the direction to the Assessing Officer for fresh adjudication after giving an opportunity of hearing to the assessee. Accordingly, once the assessment orders and addition against which the penalty was levied u/s 271(1)(c) of the I.T. Act, 1961 has been set aside, then the order passed u/s 271(1)(c) would not survive. Hence, the penalty levied u/s 271(1)(c) for both the years are set aside and the matter is remanded to the record of the Assessing Officer for reconsideration of the same, if need arises as per the outcome of the proceedings as per the directions of the learned CIT (A) in quantum appeal.
In the result, both the appeals of the assessee are allowed for statistical purposes.