DENIM CLINIC,MUMBAI vs. INCOME TAX OFFICER 23(2)(2), MUMBAI

ORDER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-40, Mumbai for A.Y.2001-02, which in turn arises from the order passed by the A.O under Se. 271(1)(c) of the Income-tax Act, 1961 (for short „Act‟). The assessee has assailed the impugned order on the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income tax (Appeal)-40, Mumbai [“the CIT(A)”] erred in confirming the penalty levied by the Income -tax Officer – 23(2)(2) [„the AO‟] u/s 271(1)(c) of the Income Tax Act, 1961 (“the Act”) amounting to Rs. 4,85,416/-.”

2. Briefly stated, the assessee firm which is engaged in the business of running a garment laundry had filed its return of income for A.Y 2001-02 on 31.10.2001, declaring its total income at Rs. 2,90,810/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. The A.O while framing the assessment had inter alia disallowed the Denim Clinic vs. ITO 23(2)(2) – ITA 973/Mum/2018 A.Y 2001-02 2 unsubstantiated „Fuel charges‟ aggregating to Rs. 12,38,304/-, which were claimed by the assessee to have been paid to two parties viz. (i).M/s Oasis Enterprises : Rs. 7,62,650/- ; and (ii) M/s Sweta Enterprises : Rs. 4,75,654/-, and assessed the income vide his order passed under Sec. 144, dated 22.12.2003 at an amount of Rs. 32,13,950/-.

3. Aggrieved, the assessee assailed the assessment order before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee sustained the addition of Rs. 12,38,304/-.

4. After the receipt of the order of the CIT(A), the A.O called upon the assessee to explain as to why penalty under Sec. 271(1)(c) may not be imposed as regards the disallowance of „Fuel charges‟ of Rs. 12,38,304/-. As the reply filed by the assessee did not find favour with the A.O, therefore, he vide his order dated 24.03.2006 imposed a penalty of Rs. 4,85,416/- under Sec. 271(1)(c) of the Act.

5. Observing that the assessee had raised a bogus claim of expenditure in its return of income, the CIT(A) upheld the penalty imposed by the A.O u/s 271(1)(c) and dismissed the appeal.

6. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorised representative (for short „A.R‟) for the assessee, at the very outset of the hearing of the appeal submitted that the quantum appeal of the assessee had been way back restored by a coordinate bench of the Tribunal, viz. ITAT “J” Bench, Mumbai, to the file of the CIT(A), vide its order passed in M/s Denim Clinic Vs. ITO 23(2)(2), Mumbai [ITA No. 2632/Mum/2005; dated 17.03.2008] (copy placed on record). Observing, that the CIT(A) without confronting the „remand report‟, dated 09.12.2004 which was obtained by him in the course of the quantum appellate proceedings, had without confronting the same to the assessee therein acted upon it and confirmed the disallowance made by the A.O, it was submitted by the ld. A.R that the tribunal in all fairness had restored the matter vide its order dated 17.03.2008 to the file of the CIT(A), with a direction to readjudicate the same after affording sufficient opportunity to the Denim Clinic vs. ITO 23(2)(2) – ITA 973/Mum/2018 A.Y 2001-02 3 assessee. It was submitted by the ld. A.R that though a substantial time period of more than 10 years had lapsed, however, the matter pursuant to the directions of the tribunal, vide its order dated 17.03.2008 had not been disposed off and is still pending before the CIT(A).

7. Per contra, the ld. Departmental representative (for short „D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R, that as the assessee had raised a bogus claim of expenditure, therefore, the A.O had rightly imposed the penalty under Sec. 271(1)(c), which thereafter had been sustained by the CIT(A).

9. Before parting, we may herein observe, that as informed by the ld. A.R, despite lapse of a substantial time period of more than 10 years from the date of the order of the Tribunal viz. 17.03.2008, the CIT(A) had yet not given effect to the directions of the tribunal and readjudicated the issue. As a result thereof, the present appeal of the assessee against the penalty imposed

Denim Clinic vs. ITO 23(2)(2) – ITA 973/Mum/2018 A.Y 2001-02 4 under Sec. 271(1)(c), left with no choice, had also to be restored by us to the file of the CIT(A), which thus had resulted into multiplicity of litigations and had pushed the assessee into prolonged litigation. In the backdrop of the aforesaid peculiar circumstances of the case, we herein direct the CIT(A) to dispose off the quantum appeal which is pending before him for more than last 10 years , as it is only then that the present appeal of the assessee against the order imposing penalty under Sec. 271(1)(c) as had been restored by us to his file can thereafter be disposed off.

Denim Clinic vs. ITO 23(2)(2) – ITA 973/Mum/2018 A.Y 2001-02 5