ALLIANCE HOTELS,MUMBAI vs. DCIT 12(1), MUMBAI

In brief, the relevant facts are that the Assessing Officer in the assessment finalised u/s 143(3) of the Act on 20.12.2011 has disallowed expenditure on the following two counts (i) depreciation not supported by bills and vouchers – Rs.69,13,144/- and (ii) interest on bank loan not used for acquisition of fixed assets – Rs.1,08,04,969/- and had initiated separately the penalty proceedings u/s 271(1)(c) of the Act. Not being satisfied with the explanation submitted by the assessee to the show cause notice dated 28.02.2014, the Assessing Officer levied penalty of Rs.60,22,390/- being 100% of the tax sought to be evaded on the above two aspects. Even the CIT(A) has affirmed the levy of penalty. Against such a decision of the CIT(A), assessee is in further appeal before us.

At the time of hearing, the learned representative for the assessee pointed out that the assessee’s appeal against the disallowance of expenditure in the quantum proceedings has been decided in favour of the assessee by the Tribunal vide its order in dated 08.11.2016. Further, it has also been submitted the Assessing Officer has an passed order dated 27.02.2017 giving effect to the Tribunal’s order, therefore, the additions on the basis of which the penalty has been levied u/s 271(1)(c) do not survive.

The ld. DR did not oppose the factual matrix brought out by the learned representative for the assessee.

We have heard the rival submissions. We find that the disallowances on the basis of which the penalty proceedings were initiated have been deleted by the Tribunal vide its order in dated 08.11.2016. Therefore, the penalty levied u/s 271(1)(c) of the Act does not survive and is hereby deleted.

In the result, appeal of the assessee is allowed.