DCIT CIR 3(1), MUMBAI vs. BUDHRANI FINANCE LTD, MUMBAI

Instant appeal by the Revenue is directed against the order dated 31st March 2008, passed by the learned Commissioner (Appeals)–27, Mumbai, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2002–03.

stocks and trading in shares. For the assessment year under consideration, the assessee filed its return of income declaring loss of ` 14,82,131. During the assessment proceedings, the Assessing Officer treated loss from trading of shares as speculative loss as against business loss claimed by the assessee and added back an amount of ` 1,66,19,718. Further, disallowance under section 14A to the extent of ` 21,028 was made which was reduced to ` 10,000 in appeal. On the basis of aforesaid additions made, the assessee preferred appeal before the learned Commissioner (Appeals) and the learned Commissioner (Appeals) having allowed assessee’s claim, the Department came in appeal before the Tribunal. During the pendency of appeal before the Tribunal, the Assessing Officer initiated proceeding for imposition of penalty and vide order dated 21st March 2007, imposED penalty of ` 59,36,809. Against the order imposing penalty under section 271(1)(c), the assessee preferred appeal before the learned Commissioner (Appeals). The learned Commissioner (Appeals), following his order in assessee’s own case for assessment year 2001–02 and 2000–01, deleted the penalty imposed. Being aggrieved, the Department is in appeal.

additions, on the basis of which penalty was imposed to the file of the Assessing Officer for deciding afresh. He, therefore, submitted, the issue relating to imposition of penalty may be restored back to the file of the Assessing Officer for deciding afresh on the basis of assessment to be made by the Assessing Officer in pursuance to the direction of the Tribunal.

4 M/s. Budhrani Finance Ltd.

Therefore, the very foundation on which the penalty was imposed under section 271(1)(c) no longer exist. We have also noted in assessment year 2001–02, in assessee’s own case in Mum./2008, upon considering the fact that the issue relating to loss from share transactions whether in the nature of trading or speculation loss has been restored back to the file of the Assessing Officer, the Tribunal upheld the order of the learned Commissioner (Appeals) in deleting the penalty with liberty to the Assessing Officer to initiate penalty proceedings after deciding the issue of claim of loss by the assessee. In consonance with the aforesaid order of the co–ordinate bench, we uphold the order of the learned Commissioner (Appeals) in deleting the penalty imposed under section 271(1)(c). However, it is open to the Assessing Officer to initiate proceedings for imposition of penalty, if warranted, after completing the assessment in pursuance to the direction of the Tribunal.