ITO, WD-47(3), KOLKATA, KOLKATA vs. SRI RAMANAND KEDIA, HOWRAH

The assessee in the present case is an individual, who is engaged in the business of trading of clothes under the name and style of his proprietary concern M/s. Ravi Textiles. The return of income for the year under consideration was filed by him on 29.10.2007 declaring total income of Rs.2,06,368/-. In the ex-parte assessment completed under section 144 to the best of his judgment vide an order dated 31.12.2009, the total income of the assessee was determined by the Assessing Officer at Rs.1,29,75,210/- after making the following additions:- (i) Loan treated as unexplained cash Rs. 1,22,500/- credit under section 68 ./2015 Assessment year: 2007-2008 Page 2 of 3 (ii) Unproved sundry creditors Rs.1,26,36,671/- (iii) Disallowance out of telephone Rs. 9,671/- expenses Penalty proceedings under section 271(1)(c) were also initiated by the Assessing Officer in respect of two additions of Rs.1,22,500/- and Rs.1,26,36,671/- made to the total income of the assessee and since the explanation offered by the assessee in response to the notice issued during the course of the said proceedings was not found acceptable by him, the Assessing Officer imposed penalty of Rs.38,99,856/- under section 271(1)(c) being 100% tax sought to be evaded by the assessee on the said two additions.

The penalty imposed by the Assessing Officer under section 271(1)(c) was challenged by the assessee in the appeal filed before the ld. CIT(Appeals). Meanwhile the appeal filed by the assessee in the quantum proceedings against the order passed by the Assessing Officer under section 144 was disposed of by the ld. CIT(Appeals) vide an appellate order dated 13.03.2015, whereby he annulled the assessment order passed by the Assessing Officer under section 144 by treating the same as ab initio invalid and also deleted the additions made by the Assessing Officer to the total income of the assessee in the said assessment. Taking note of the said order dated 13.03.2015 passed in quantum proceedings, the ld. CIT(Appeals) cancelled the penalty imposed by the Assessing Officer under section 271(1)(c) on the ground that the basis of initiation of penalty proceedings itself did not survive.

Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.

At the time of hearing, none has appeared on behalf of the assessee. This appeal of the Revenue is, therefore, being disposed of ex-parte qua the respondent-assessee after hearing the arguments of the ld. D.R. and perusing the relevant material available on record. It is observed that the corresponding assessment order passed by the Assessing Officer under ./2015 Assessment year: 2007-2008 Page 3 of 3 section 144 having been annulled by the ld. CIT(Appeals) vide his appellate order dated 13.03.2015 passed in quantum proceedings, the very basis or foundation of the penalty imposed by the Assessing Officer under section 271(1)(c) no more survived and the said penalty is, therefore, liable to be cancelled having no legs to stand as rightly held by the ld. CIT(Appeals). At the time of hearing, the ld. D.R. has not been able to bring anything on record to show that the appellate order dated 13.03.2015 passed by the ld. CIT(Appeals) in the quantum proceedings has been subsequently set aside or reversed by the Tribunal. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer under section 271(1)(c) and upholding the same, we dismiss this appeal filed by the Revenue.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on July 31, 2017.