INCOME TAX OFFICER, MANDSAUR vs. OREF SECURITIES PVT. LTD., MANDSAUR
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 08.05.2023 passed by learned Commissioner of Income-tax, NFAC, Delhi [“CIT(A)”], which in turn arises out of penalty-order dated 07.03.2019 passed by learned ITO, Mandsaur [“AO”] u/s 271(1)(c) of Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2013-14, the revenue has filed this appeal on following solitary ground:
“Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in law in deleting the penalty imposed u/s 271(1)(c) of Income-tax Act,
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ITO, Mandsaur vs. OREF Securities P. Ltd., Mandsaur. ITA No. 254/Ind/2023 – AY 2013-14
1961, amounting to Rs. 5,73,07,050/- on the basis that quantum of addition has been deleted by ITAT in the assessee’s case, whereas the department has filed before Hon'ble High Court of Madhya Pradesh, Indore Bench against the order of ITAT, Indore in the case of the assessee for assessment year 2013-14 vide case No. Income Tax Appeal (ITA-70/2022) registered at High Court of Madhya Pradesh, Indore, Bench on 13.06.2022 decision on which is still pending.” 2. The background facts relating to present appeal are such that for the
relevant A.Y. 2013-14, the assessee-company filed return of income
declaring a total income of Rs. 2,200/-. The case was selected under
scrutiny and statutory notices u/s 143(2)/142(1) were issued. Ultimately,
the AO made assessment vide order dated 22.03.2016 u/s 143(3) at a total
income of Rs. 11,77,52,200/- after making an addition of Rs.
11,77,50,000/- vide para no. 5 of assessment-order on account of share
capital u/s 68. Simultaneously, the AO initiated penalty proceedings u/s
271(1)(c) vide notice dated 22.03.2016 qua the addition made by him in
assessment-order. Ultimately, the AO passed penalty-order on 07.03.2019
imposing a penalty of Rs. 5,73,07,050/- treating the impugned addition of
Rs. 11,77,50,000/- as concealed income. Aggrieved by penalty-order, the
assessee carried matter in first appeal and succeeded. Now the Revenue has
come before us in next appeal assailing the order of first-appeal.
During the course of hearing before us, it emerged that the Ld. CIT(A)
has deleted penalty because the quantum-addition of Rs. 11,77,52,200/-,
for which the impugned penalty was imposed by AO, had itself been deleted
by ITAT, Indore Bench in ITA No. 70/Ind/2018 order dated 17.11.2021. The
order passed by the CIT(A) is reproduced below for an immediate reference:
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ITO, Mandsaur vs. OREF Securities P. Ltd., Mandsaur. ITA No. 254/Ind/2023 – AY 2013-14
“4. The Hon'ble ITAT, Indore Bench, vide ITA No.70/Ind/2018 dated 17.11.2021, has allowed the quantum appeal for A.Y. 2013-14 of the appellant’s case. As the quantum appeal has been allowed by the Hon'ble ITAT, Indore. Therefore, any penalty levied on the basis of additions made in the assessment order-cannot survive, the penalty levied u/s 271(1)(c) of the Act is deleted.” 4. As can be seen from above order, the Ld. CIT(A) has observed that the
quantum-addition has already been deleted by the ITAT Indore Bench and
therefor the penalty u/s 271(1)(c) cannot survive. The revenue/respondent
is also accepting this aspect noted by CIT(A) but claiming that since the
revenue’s quantum-appeal against the order of ITAT is pending before
Hon'ble High Court of M.P., the penalty imposed by AO must survive and
the Ld. CIT(A) has erred in granting relief to the assessee. Before us, Ld. DR
emphasized the grievance of revenue. Per contra, Ld. AR for assessee
submitted that the impugned penalty u/s 271(1)(c) is based on the
quantum-addition made by AO and since the quantum-addition itself stands
deleted, the CIT(A) was legally justified in granting relief to the assessee.
Therefore, there is no infirmity in the order of CIT(A).
We have considered submissions of both sides. We observe that the
CIT(A) has given relief qua the addition deleted. On a careful reading of
section 271(1)(c), we observe that the levy of penalty as well calculation-
formula of the penalty contemplated in section 271(1)(c) is linked with
quantum-addition. Therefore, if the addition itself does not subsist, the
penalty has not leg to stand. Due to this position of law, we do not find any
merit in the submission of revenue that the penalty must survive during the
pendency of quantum-appeal before Hon’ble High Court. Therefore, we are
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ITO, Mandsaur vs. OREF Securities P. Ltd., Mandsaur. ITA No. 254/Ind/2023 – AY 2013-14
in agreement with the order passed by CIT(A). Hence, we uphold the same
and dismiss this appeal of revenue which has not merit.
Before parting, we make it clear that in a case the revenue succeeds in its pending appeal before Hon’ble High Court, then the AO shall be at liberty and entitled to re-initiate penalty proceeding as per the relevant provisions of the act and the rules made thereunder in accordance with the outcome of
the judgement of Hon’ble High Court.
In the result, this appeal of revenue is dismissed.
Order pronounced in open court on 07.02.2024.
Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 07.02.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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