DCIT, CIRCLE-6, JAIPUR, NCRB, JAIPUR vs. BARMER LIGNITE MINING COMPANY LIMITED, JAIPUR

1 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Mk0 ehBk yky ehuk] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & DR MITHA LAL MEENA, AM vk;dj vihy la-@ITA No. 71/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2012-13 The DCIT cuke M/s. Barmer Lignite Mining Company Ltd. Vs. Office No. 2 & 3, 7th Floor Upasana Plaza,C- Circle-6 Jaipur 44, Sardar Patel Marg, Jaipur – 302 001 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCB 0574 G vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@Revenue by: Shri Arvind Kumar, CIT-DR fu/kZkfjrh dh vksj ls@Assessee by : Shri P.C. Parwal CA lquokbZ dh rkjh[k@Date of Hearing : 05/03/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 04/06/2024 vkns'k@ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the Revenue is directed against order of the ld. CIT(A) dated 29-11-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2013-14 raising therein following grounds of appeal. ‘’1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of Rs.94,85,126/- imposed by the AO ignoring the fact that the assessee has failed to prove that he has not furnished inaccurate particulars u/s 271(1)(c) of the Act with reference to addition of legal and professional expenses

2 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR of Rs.44,81,910/-, upfront fees paid Rs.52,58,106/- and legal expenses paid to IDFCL Rs.1,94,94,460/-. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of Rs.2,79,25,403/- imposed by the AO ignoring the fact that the addition w.r.t. the issues i.e. amortization of surface rights of Rs.8,18,38,172/- and disallowance of depreciation on intangible assets of Rs.42,49,575/- made in the original assessment order dt. 25.02.2015 were sustained in the assessment order passed u/s 143(3) r.w.s. 254 of the Act dt. 24.10.2018.’’

2.1 Apropos Ground No. 1 of the Revenue, the facts as emerges from the order of the ld CIT(A) in which the ld. CIT(A) has allowed the Ground No 1 of the assessee by observing at para 8 to 8.3 of his order under:- 8. Ground No. 3 is against the addition of Legal and Professional expenses of Rs. 44,81,910/-, upfront fees paid Rs. 52,58,106/- and legal expenses paid to IDFCL Rs. 1,94, 94,460/- by treating it as capital expenditure. The appellant stated that there is no inconsistency between the correctness of the details of expenditure claimed by the appellant and the amount examined by the AO. The legal expenses borne by the appellant was for obtaining the loan to carry out operation of Kapurdi Mines and the legal fees paid to PNB/SBI Capital Market was for raising the project report in relation to the mine, which commenced commercial operation in October 2011. The appellant, thus, contended that the same cannot be disallowed on account of furnishing inaccurate income by the appellant as the entire expenditure was claimed to be revenue in nature and was duly evidenced, accounted for and was supported with audit reports during filing its return of income. The fact that the appellant had furnished documents regarding all the expenses incurred in connection with the Kapurdi Mines is also clear from the perusal of the penalty order as well as the assessment passed by the AO. Therefore, the question of furnishing inaccurate income does not arise here.

3 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR

8.1 I have perused the appellant's submission and I concur with the view of the appellant that in respect of above three disallowances there is no dispute as to the correctness of the amount of expenditure incurred in as much as the correctness of the expenditure was examined by the Ao and no discrepancy in the amount of the expenditure claimed and details of expenditure was found by him. The entire expenditure was duly evidenced and accounted for. The appellant has bonafide belief that these expenditures are revenue in nature and that's why they claimed it so. The assessing officer made disallowance by treating them as capital in nature... Thus levying penalty on account of furnishing inaccurate particulars is not justified. There are plethora of judgements by various courts which has held time and again that mere claiming an expenditure as revenue which is held as capital by the 8.2. The Hon'ble Supreme Court judgment in CIT vs Reliance Petroproducts Pvt Ltd [2010] 322 ITR 158 has defined what is the meaning of "furnishing incorrect particulars of income" The word particulars must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. 8.2.1 In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee Such claim made in the return cannot amount to the inaccurate particulars 8.3 The Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Income Tax versus Amtek Auto Limited (supra) has held that "merely because assessee claimed expenditure as revenue, which was held as capital by the Assessing Officer, penalty for concealment could not be imposed where assessee discloses nature of transaction’’

4 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR In view of the foregoing discussion and respectfully following the decisions of the Hon'ble Courts, I am of the view that Explanation 1 of 271(1) is not attracted in the case of the assessee for levy of penalty under section 271(1)(c) of the Act Accordingly, the penalty levied by the Assessing Officer on these three disallowance is deleted. Thus Ground No. 3 is allowed.’’

2.2 During the course of hearing, the ld.DR supported the order of the AO and also filed following written submission countering the order of the ld. CIT(A). ‘’Ground of appeal no.1 The assessee debited a sum of Rs. 44,81,910/- as legal and professional expenses, Rs. 52,58,106/- as upfront fees paid and Rs. 1,94,94,460/- as legal expenses paid to Industrial Development Financial Corporation Limited (IDFCL) under the head Finance Cost of the audited financials and claimed as revenue expenditure while computing the income. The assessee debited Rs. 44,81,910/- as legal and professional expense. M/s SBI Capital had been appointed for appraising the project report. The said loan had been raised for Kapurdi mines which commenced commercial operation in October, 2011. Thus expenses incurred prior to October, 2011 required to be capitalized. This expenditure was in the nature of capital not revenue as decided by the Hon'ble Gujarat High court in case of Saurasthra Cement and Chemical Industries Limited VS. CIT (1992) (196 ITR 237) and also held in case JK Chemicals Limited (1994) (207 ITR 985). Accordingly expenditure of Rs. 44,81,910/- was disallowed by the AO and penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 was initiated on this issue for furnishing inaccurate particulars of income. Further, the assessee debited Rs. 52,58,106 as upfront fee expense. The upfront fee was paid for acquisition of fixed assets and is in the nature of capital to bring the new assets into its existence. The upfront fees paid by the assessee was in the nature of interest as defined u/s 2(28 A) of the Income Tax Act and was also hit by Section 36(1)(iii) of the I.T. Act in the case of assessee. Accordingly, expenditure of Rs. 52,58,106/- was disallowed by the AO and penalty proceedings u/s 271(1)(c) of the

5 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR Income Tax Act, 1961 was initiated on this issue for furnishing inaccurate particulars of income. The assessee paid a sum of Rs. 1,94,94,460/- towards arrangement of long-term loan to M/s IDFCL under the head "legal and professional charges" out of the total Rs. 2,04,85,244/- and claimed as revenue expenditure while computing the income. The assessee was asked to provide the details of the same and assessee submitted that fees was paid to M/s IDFCL as legal fees for obtaining long term loans for Kapurdi Mines. These expenses were in nature of capital expenditure as the company had also followed the accounting policy for fixed assets and hence the cost attributable to acquisition of the assets was required to be added in the cost of the fixed assets. Accordingly, expenditure of Rs. 1,94,94,460/- was disallowed by the AO and penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 was initiated on this issue for furnishing inaccurate particulars of income. It is also submitted that Delhi High Court in the case of Commissioner of Income Tax vs Zoom Communication Pvt Ltd on 24 May, 2010 has held that it is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide. If the claim besides being incorrect in law is malafide, Explanation 1 to Section 271(1) would come into play and work to the disadvantage of the assessee. The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(1)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under Section 143(1) of the Act and even if their case is selected for scrutiny, they can get

6 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. Further, the ITAT MUMBAI BENCH 'I' in the case of Assistant Commissioner of Income- tax Circle- 1(2) v. Jasubhai Business Service (P) Ltd. has held that it has to be seen as to whether assessee has furnished (i) inaccurate particulars and submitted an explanation and (ii) whether such explanation is bona fide and (iii) all the facts relating to computation of income have been disclosed by the assessee. The facts, which are not accurate, will be inaccurate. Accurate facts are those to which if further facts are supplemented would not alter the decision. Facts disclosed would be inaccurate if on further supplementing the facts, the decision would be reversed. Accurate facts also mean full and true facts, which have a material bearing on making computation of income. According to us, the facts disclosed by the assessee were half-truth and hence not accurate i.e., inaccurate. It is already held that the claim is not bona fide. The words 'particulars of income refer to the facts which lead to the correct computation of income in accordance with the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate then the assessee would be liable to penalty under section 271(1)(c). Therefore, in view of the Delhi High Court Judgment and ITAT Mumbai Bench Judgement the assessee's case will fall under the category of furnishing of inaccurate particulars of income and the penalty u/s 271(1)(c) of the act was rightly imposed by the AO.’’

2.3 During the course of hearing, the ld. AR supported the order of the ld. CIT(A) and also filed the following written submission.

7 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR ‘’1. The reason for disallowance out of legal & professional expenses, upfront fees paid, legal expenses paid to IDFCL and the assessee’s explanation as to why on such disallowance penalty cannot be levied is summarized as under:-

a) Legal & Professional Fees The AO observed that the assessee has paid Rs.44,81,910/- to SBI Capital Market Limited as legal and professional fees and claimed the same as revenue expenditure. However SBI Capital Market Limited was appointed for appraising the project report. The said loan was raised for Kapurdi Mines which commenced operations in October 2011. Thus expenses prior to October 2011 need to be capitalized. Therefore he disallowed these expenses.

b)Upfront Fees The AO observed that the assessee has paid Rs.52,58,106/- to PNB as upfront fees and claimed the same of revenue expenditure. However the upfront fees has been paid for acquisition of fixed assets and needs to be capitalized. The same cannot be claimed as revenue expenditure and thus the same was disallowed.

c) Legal expenses paid to IDFCL The AO observed that the assessee has paid Rs.1,94,94,460 to IDFCL as legal expenses towards arrangement of long term loan and claimed the same as revenue expenditure. The said expenses are in the nature of capital expenses and were therefore disallowed by the AO.

8 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR therefore, they could at the most be termed as difference of opinion but it has nothing to do with the furnishing of inaccurate particulars of such income. Mere disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty u/s 271(1)(c) of the Act. It is a settled law that mere making of the claim, which is not sustainable in law by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Hon’ble Supreme Court in case of CIT Vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 at Para 10, 11 & 12 of its order (PB 81-82) held as under:- 10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as: "not accurate, not exact or correct ; not according to truth ; erroneous ; as an inaccurate statement, copy or transcript." 11. We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. 12. It was tried to be suggested that s. 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the AO had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion,

9 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR attract the penalty under s. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the Legislature. In view of above, Ld. CIT(A) has rightly deleted the levy of penalty in respect of disallowance of legal & professional expenses, upfront fees paid & legal expenses paid to IDFCL and therefore, his order be upheld by dismissing Ground No.1 of the department..

We have heard both the parties and perused the materials available on 2.4 record. From the record, the Bench noticed that the AO made disallowance of legal and professional fees, upfront fees and legal expenses paid to IDFCL by holding that it as a capital expenditure as against revenue expenditure claimed by the assessee. On this disallowance, penalty u/s 271(1)© of the Act is imposed by him. There is no dispute as to the correctness of the amount incurred. The assessee under a bona fide belief claimed the expenditure as revenue expenditure. The AO considered these expenditures as capital expenditure solely on account of a different view taken by him. This does not lead to any conclusion that there is furnishing of inaccurate particulars of income. The ld. CIT(A) has rightly appreciated these facts by relying on the decision of Hon’ble Supreme Court in the case of CIT vs Reliance Petroproducts (P) Ltd. 322 ITR 158 and the decision of Hon’ble Punjab & Haryana High Court in the case of Amtek Auto Ltd. (supra) in holding that Explanation 1 of Section 271(1)(c) of the Act is not attracted and thus rightly deleted the levy of penalty on the above disallowance. In view of the above

10 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR deliberation, we uphold the order of the ld. CIT(A) by dismissing the Ground No. 1 of the Revenue. 3.1 Apropos Ground No. 2 of the Revenue, the facts as emerges from the order of the ld CIT(A) in which the ld. CIT(A) has allowed the Ground No 2 of the assessee by observing at para 9 to 9.3 of his order under:- ‘’9. Through Ground No. 4, the appellant has contested the penalty on the disallowance of Amortization of surface rights of Rs. 8,18,38,172/- and disallowance of Depreciation on intangible assets of Rs. 42.49.575/- The appellant in its submissions has stated that the above disallowances made in the original assessment order u/s 143(3) of the Act dated 25.02.2015 had been set aside by Hon'ble ITAT to the file of AO vide order dated 12.10.2017 to decide afresh. Further the appellant averred that that the penalty which has been imposed by the AO vide order dated 31.03.2019 is bad in law as the penalty proceedings should have also been initiated afresh in the set aside assessment order and therefore, the penalty proceedings initiated in the original assessment order and the penalty order dated 31.03.2019 stand annulled.

9.1 The order of ITAT was perused and it is noticed that ITAT vide its order dated 12.10.2017 has set aside both the issue ie. Amortization of surface rights of Rs. 8,18,38,172/- and disallowance of Depreciation on intangible assets of Rs 42,49,575/- to the Ao to decide the issue afresh. In view of which the original order passed by AO and penalty initiated on both these issue in original order won't survive.

9.2 The same issue has also been considered and decided by the Hon'ble Supreme Court in the case of CIT Panchkula Vs Jai Laxmi Rice Mills Ambala City(2015) 379 ITR 521. The relevant excerpt is reproduced as below:

11 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR ‘’In respect of Assessment Year 1992-1993, assessment order was passed on 26.02.1996 on the basis of CIB information informing the Department that the assessee is engaged in large scale purchase and sale of wheat, but it is not filing income tax Signature Not Verified return. Ex-parte proceedings were initiated, which Digitally signed by ASHWANI KUMAR Date: 2015.11.26 resulted in the aforesaid order as per which income of the assessee was assessed at Rs. 18,34,584/- While framing the assessment, the Assessing Officer also observed that the assessee had contravened the provisions of Section 269SS of the Act and because of this the Assessing Officer was satisfied that penalty proceedings under Section 271E of the Act were to be initiated. The assessee carried out this order in appeal. The Commissioner of Income Tax (Appeals) allowed the appeal and set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. After remand, the Assessing Officer passed fresh assessment order In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section 271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02 1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996. Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. It is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original assessment order and when that assessment order had been set aside, could still survive. The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under Section 271E would also not survive. This according to us is the correct proposition of law as pointed out above, insofar as fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act. though in that order the Assessing Officer wanted

12 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed.’’ 9.3 Though the above decision is in respect to the penalty u/s 271 E but it made clear that when the original assessment order itself is set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding will also not survive. I have considered the facts of case and details placed on record, it is found that the contention raised by the appellant is correct as the Assessing Officer has levied the penalty on the basis of original order which was set aside by the ITAT on both the issues to the Ao to decide the issue afresh Thus penalty initiated based on original order wont survive. It was mandatory for the AO to initiate fresh penalty proceedings in the set aside assessment order as directed by the Hon'ble ITAT. however, the AO failed to do so. Therefore, I find no infirmity in the contention of the appellant in this regard and hence the penalty levied on the issue of disallowance of Amortization of surface rights of Rs. 8,18,38,172/- and disallowance of Depreciation on intangible assets of Rs. 42,49,575/- is deleted. Thus Ground No. 4 is allowed.’’

3.2 During the course of hearing, the ld.DR supported the order of the AO and also filed following written submission countering the order of the ld. CIT(A). ‘’Ground of appeal no.2: The Hon'ble ITAT vide its order dated 12.10.2017 has set aside both the issue ie. Amortization of surface rights of Rs. 8,18,38,172/- and disallowance of Depreciation on intangible assets of Rs. 42,49,575/- to the AO to decide the issue afresh. In this regard, the order u/s 143(3) r.w.s. 254 of the Act was passed by the AO on date 24.10.2018 adding both the issue i.e. Amortization of surface rights of Rs. 8,18,38,172/- and disallowance of Depreciation on intangible assets of Rs. 42,49,575/-. The Assessing officer upheld both the additions as it was made in the original

13 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR assessment order passed u/s 143(3) dated 25.02.2015. Therefore, the penalty proceedings are automatically upheld as it was initiated in the original order dated 25.02.2015. In the penalty order u/s 271(1)(c) it is also mentioned that the addition made earlier was sustained.’’

3.3 On the other hand, the ld. AR of the assessee supported the order of the ld.

CIT(A) and further submitted the following written submission. 3. So far as penalty levied in respect of disallowance of amortization of surface rights and depreciation on intangible assets is concerned, it may be noted that Hon’ble ITAT at Para 7.5, Pg 31-35 (PB 39-43) and Para 9.2, Pg 44-45 (PB 52-53) of its order has set aside the issue to the AO to decide the same afresh. Thus when these two disallowances have been set aside to the AO, penalty cannot be levied as held by Hon’ble Supreme Court in case of CIT, Panchkula Vs. Jai Laxmi Rice Mills Ambala City [2015] 379 ITR 521 where in respect of penalty levied u/s 271E of the Act, it held as under (PB 76):- “2. In respect of Assessment Year 1992-1993, assessment order was passed on 26.02.1996 on the basis of CIB information informing the Department that the assessee is engaged in large scale purchase and sale of wheat, but it is not filing income tax. Ex-parte proceedings were initiated, which resulted in the aforesaid order, as per which net taxable income of the assessee was assessed at Rs. 18,34,584/-. While framing the assessment, the Assessing Officer also observed that the assessee had contravened the provisions of Section 269SS of the Act and because of this the Assessing Officer was satisfied that penalty proceedings under Section 271E of the Act were to be initiated. 3. The assessee carried out this order in appeal. The Commissioner of Income Tax(Appeals) allowed the appeal and set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. 4. After remand, the Assessing Officer passed fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02.1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996. Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. It is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original assessment order and when that assessment order had been set aside, could still survive.

14 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR 5. The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under Section271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order. 6. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed.” Thus when the issue is set aside, penalty initiated based on the original order will not survive. The AO can initiate fresh penalty proceedings in the set aside assessment order. Therefore, Ld. CIT(A) has rightly deleted the penalty levied on these issues by the AO. Hence, Ground No.2 of the department be dismissed.

3.4 We have heard both the parties and perused the materials available on record. The undisputed fact of this case is that ITAT Jaipur Bench in its own case in ITA No.534 & 510/JP/2017 dated 12-10-2017 has set aside the issue to decide the same afresh. Thus when on these two issues (supra), the disallowance made by the AO has been set aside to him to decide the same afresh, penalty cannot be levied in view of principle laid down by Hon’ble Supreme Court in the case ofCIT vs Jai Laxmi Rice Mills, 379 ITR 521. The ld CIT(A) after considering the said decision which though is with reference to penalty u/s 271E of the Act but relying on the principle laid down in this decision that when original assessment order is set aside, the satisfaction recorded therein for the purpose of initiation of penalty proceedings will also not survive, has rightly deleted the penalty levied by the AO

15 ITA NO. 71/JP/2024 DCIT, CIRCLE-6, JAIPUR VS BARMER LIGNITE MINING COMPANY LTD., JAIPUR on the above two disallowances. In view of the above facts and circumstances of the case, we concur with the findings of the ld CIT(A). Thus Ground No. 2 of the Revenue is dismissed. 4.0 In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 04/06/2024.

Sd/- Sd/- ¼ Mk0 ehBk yky ehuk ½ ¼lanhi xkslkbZ½ (Dr. Mitha Lal Meena) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 04 /06/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- The DCIT, Circle-6, Jaipur 2. izR;FkhZ@ The Respondent- Barmer Lignite Mining Company Ltd. Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No.71/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेजज. त्महपेजतंत