SABAYASACHI RAY,MUMBAI vs. ITO 11(1)(4), MUMBAI

Brief facts are, the assessee is an individual. For the assessment year under consideration, assessee filed its return of income on 20th July 2007, declaring total income of ` 8,85,720. Assessment in case of 2 Shri Sabyasachi Ray assessee was completed under section 143(3) determining total income at ` 47,13,510, including addition made from undisclosed sources of ` 38,27,799. Being aggrieved by the assessment order, the assessee preferred appeal before the learned Commissioner (Appeals).

The learned CIT(A), however, confirmed the assessment. Being aggrieved, assessee preferred appeal before the Tribunal.

During the pendency of appeal before the Tribunal, the Assessing Officer initiated proceedings under section 271(1)(c) and ultimately passed an order on 26th March 2013, imposing penalty of ` 12,88,435, alleging concealment of income of ` 38,65,305. Though, the assessee challenged the penalty order before the first appellate authority, the learned Commissioner (Appeals) disposed off the appeal ex–parte by confirming imposition of penalty.

Learned Authorised Representative submitted before us that while deciding the quantum appeal of the assessee, the Tribunal had restored the matter back to the file of the Assessing Officer for denovo adjudication, therefore, she submitted, as the addition on the basis of which penalty was imposed, is no longer in existence, the order imposing penalty cannot survive.

Learned Departmental Representative submitted, the issue of imposition of penalty may also be set aside to the file of the Assessing Officer in view of the order passed by the Tribunal in quantum appeal.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, the basis for imposition of penalty under section 271(1)(c) is the addition made on account of income from undisclosed sources amounting to ` 38,27,799. We have noted, while deciding assessee’s appeal challenging the aforesaid addition in ITA no.6042/Mum./2013, dated 3rd June 2016, the Tribunal has restored the matter back to the file of the Assessing Officer for denovo adjudication. Therefore, at present, the addition on the basis of which penalty under section 271(1)(c) was imposed is not in existence. That being the case, penalty imposed under section 271(1)(c) on the basis of such addition cannot also survive. Accordingly, we set aside the impugned order of the learned Commissioner (Appeals) confirming the imposition of penalty under section 271(1)(c). It is open to the Assessing Officer to initiate proceedings for imposition of penalty under section 271(1)(c), if warranted, after completion of assessment in pursuance to the direction of the Tribunal as referred to above.