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Facts
The Revenue appealed against the CIT(A)'s order deleting a penalty of Rs. 1,25,00,000/-, imposed under Section 271(1)(c). The Hon'ble High Court had previously set aside a Tribunal order and restored the matter to the ITAT to decide the issue afresh, specifically the penalty, in light of the quantum appeal's decision.
Held
The Tribunal, considering that the quantum appeal was still pending, decided that the penalty appeal should also await the decision on the quantum appeal. The Tribunal then restored the issue of penalty imposition and quantification to the Assessing Officer for a denovo order.
Key Issues
Whether the penalty appeal should be decided before or after the quantum appeal, and the proper procedure for deciding penalty imposition and quantification.
Sections Cited
271(1)(c), 260A, 154, 263
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRAShri B. P Yadav, Cost Acct
1 This is an appeal preferred by the Revenue against the impugned order of the Ld. Commissioner of Income Tax (Appeals)-I [hereinafter referred to as the “CIT(A)”], Lucknow dated 11.10.2006 for assessment year 1990-91 whereby the Ld. CIT(A) deleted the penalty amounting to Rs.1,25,00,000/- imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as the “Act”). Vide order dated 19.04.2007 in the Revenue’s appeal against the aforesaid impugned appellate order dated 11.10.2006 of the Ld. CIT(A) was dismissed by Co-ordinate Bench of Income Tax Appellate Tribunal (ITAT, for short). Revenue took the matter to the Hon'ble Allahabad High Court in appeal under section 260A of the Act. Vide order dated 03.02.2012 in Income Tax Appeal No.101 of 2007, Hon'ble Page 2 of 6 Allahabad High Court set aside the aforesaid order dated 19.04.2007 of the Co-ordinate Bench of Income Tax Appellate Tribunal (ITAT) and restored the matter back to the ITAT to decide the issue afresh in the light of the decision taken in the quantum appeal. The relevant portion of the aforesaid order dated 03.02.2012 of the Hon'ble Allahabad High Court is reproduced as under: - “3. The brief facts of the case are that the assessee is a State Public Sector Undertaking, engaged in the business of civil construction work, like bridges, flyovers in India and abroad. For the assessment year under consideration, the assessee filed its return of income on 31.12.1990 declaring a loss of Rs. 1,55,68,934/- against which the assessment was completed by the A.O. at nil income, which was set aside by the CIT(A) and a fresh assessment was completed on the net loss of Rs. 87,81,840/- on 21.03.1996. Against the said assessment year, the assessee filed an appeal before the CIT(A), who passed an order on 20.03.1997 giving part relief to the assessee and computed the income of Rs. 63,04,100/-. Later, the assessment was rectified u/s 154 of the Act on 08.05.2001 on a net loss of Rs. 1,06,85,540/-. The issue was again examined by the CIT-I, Lucknow under the provisions of Section 263 of the Act, where he has observed that the A.O. has not taxed the Exchange Variation Reserve (EVR) amounting to Rs. 2,00,62,003/- appearing on asset side in the balance sheet of the assessee as on 31.03.1990. Finally, on 28.03.2003, the CIT has set aside the assessment u/s 263.
Final assessment order was passed on 12.12.2003 determining the total income at Rs. 71,28,266/- which included addition pertaining to EVR. In the meantime, the A.O. initiated penalty proceedings u/s 271 (1)(c) of the Act. After due notice, the A.O. imposed the penalty of Rs. 1,25,00,000/- u/s 271(1)(c) of the Act, the same was cancelled not only by the CIT(A), but also by the Tribunal vide its impugned order. Still not being satisfied, the department has filed the present appeal before this Court.
With this backdrop, we have heard learned counsel for parties and gone through the materials available on record.
There is consensus between the parties that the appeal pertaining to the quantum for the assessment year in question is still pending before the Tribunal. Though proceedings under penalty and quantum appeals are independent as per ratio laid down in the case of Durga Kamal Rice Mills Vs. Commissioner of Income Tax, , but in the instant case, it will be appropriate, if the Tribunal will first decide the quantum appeal and then penalty appeal, specially when in the present case, the penalty imposed is based pertaining to the concealment, for which addition has already been made and the same is a subject matter before the Tribunal in a quantum appeal. Hence issue pertaining to impose penalty is solely depend on quantum appeal. Therefore, at this stage, no answer can be given to the substantial questions of law and the answer to the substantial questions of law will be discussed in an appropriate case.
Page 3 of 6 7. With the consent of learned counsel for parties, we set aside the impugned order and restore the matter to the Tribunal to decide the issue of penalty afresh in the light of decision taken in the quantum appeal.” 1.1 It is, in this background that we heard this appeal. In the course of appellate proceedings in ITAT, in pursuance of the aforesaid order dated 03.02.2012 of Hon'ble Allahabad High Court heariing were fixed from time to time. On perusal of records, it is found that the quantum appeal was decided by Co- ordinate Bench of ITAT, Lucknow in ITA. No.783/Alld/2007. The relevant portion of which is reproduced as under: - 1.2 On perusal of the aforesaid order of the ITAT, it is found that the issue regarding addition of Rs.2,00,62,003/- on account of difference of trial balance of Iraqi and Nepali units was restored back to the file of the Ld. CIT(A). Further, the Income Tax Appellate Tribunal found no infirmity in the directions given by the Ld. CIT(A) to Assessing Officer to look into the assessee’s claim of 100% depreciation, amounting to Rs.1,22,82,193/-. The direction of Ld. CIT(A) given to the Assessing Officer to find out the cost of each shuttering, and if the same was less than Rs.5000/- and was put to use, 100% depreciation was directed to be allowed; was upheld by aforesaid order of Co-ordinate Bench of ITAT. Thus, the issue regarding the aforesaid addition of Rs.2,00,62,003/- was restored by ITAT to the file of the Ld. CIT(A); and the issue regarding depreciation, amounting to Rs.1,22,82,193/- claimed by the assessee at 100% stood restored to the file of the Assessing Officer. In view of the foregoing, and having regard to the facts and circumstances of the present case, we set aside the impugned appellate order dated 11.10.2006 of the Ld. CIT(A) and we restore the issue regarding imposition, and if imposed then the quantification of penalty under section 271(1)(c) of the Act, to the file of the Assessing Officer; with the Page 5 of 6 direction to pass denovo order in accordance with law after providing reasonable opportunity to the assessee and after giving due consideration to consequential orders passed by the Ld. CIT(A) and the Assessing Officer with regard to the aforesaid additions of Rs. 2,00,62,003/- and Rs. 1,22,82,193/- in pursuance of order of ITAT relevant portion of which has already been reproduced in foregoing paragraph (1.1) of this order. All the grounds of appeal are treated as disposed off in accordance with the aforesaid directions.
In the result, the appeal of the Revenue is partly allowed for statistical purposes. Order pronounced in the open Court on 07/02/2025.