NALLASAMY MOHANRAJ,ERODE vs. ITO, WRD-2(3), ERODE

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Order No.ITBA/NFAC/S/250/2023- 24/1058160395 (1) dated 23.11.2023. The assessment was framed by the Assistant Commissioner of Income Tax, Ward-2(3), Erode for the assessment year 2010-11 u/s.144 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.12.2018. The impugned

At the outset, the ld.counsel for the assessee filed copy of Tribunal order in quantum appeal in for assessment year 2010-11, order dated 07.05.2024, wherein the Tribunal has remanded the matter in quantum appeal back to the file of the AO. The relevant finding of Tribunal reads as under:- “2. Though the assessee has remained negligent, however, keeping in mind the principle of natural justice, we deem it fit to grant another opportunity to the assessee to substantiate its case. Accordingly, the matter is restored back to learned AO for de novo assessment after affording reasonable opportunity of hearing to the assessee. The assessee is directed to substantiate its case forthwith failing which Ld. AO shall be at liberty to proceed with assessment on merits on the basis of material on record. The Ld. Sr. DR has pleaded for imposition of cost However, considering the background of the assessee, the bench is not inclined towards the same.”

The ld.counsel for the assessee stated that the present penalty levied by AO u/s.271(1)(c) of the Act is arising out of the quantum of addition of cash deposit and certain addition under the head capital gains was restored back to the file of the AO. The ld.counsel stated that in present on quantum addition, neither AO order nor CIT(A)-NFAC order survived after the order of the Tribunal. Hence, he argued that penalty levied by AO u/s.271(1)(c) of the Act and - 3 - CIT(A)-NFAC will not survive. When these facts were confronted to ld. Senior DR, he could not controvert the above fact situation.

After hearing both the sides and going through the facts of the case that the quantum appeal is set aside by Tribunal by setting aside the order of AO as well as CIT(A)-NFAC and remanded back to the file of AO for fresh adjudication, it means that there is no assessment order. Once assessment is set aside, penalty will not survive. Hence, we quash the penalty order. However, the AO is free to reinitiate penalty proceedings u/s.271(1)(c) of the Act, in fresh assessment, in case, the AO comes to a conclusion or he is satisfied that this is a fit case for levy of penalty for concealment of income in term of section 271(1)(c) of the Act.

In the result, the appeal filed by the assessee is allowed.