ROHDIA SPECIALTY CHEMICALS INDIA LTD,MUMBAI vs. ADDL CIT CIR 6(1), MUMBAI

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ITA 1541/MUM/2014Status: DisposedITAT Mumbai19 August 2016AY 2006-074 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the addition on which the penalty was based no longer survived due to being restored for fresh assessment, the penalty imposed cannot survive. Consequently, the penalty order was set aside.

What were the facts?

The assessee claimed a deduction for salvage of material loss in flood. The Assessing Officer made an addition for this amount, and the Commissioner (Appeals) confirmed the penalty under Section 271(1)(c) on this addition. However, the Tribunal had previously restored the issue of the addition back to the Assessing Officer for fresh adjudication.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained when the underlying addition has been restored for fresh assessment by a higher appellate authority.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN

For Appellant: Shri Chintan Shah
For Respondent: Shri Prakash R. Mane

Instant appeal by the assessee is directed against the order dated 12th December 2013, passed by the learned Commissioner (Appeals)–14, Mumbai, confirming penalty imposed under section 271(1)(c) of the Act for the assessment year 2006–07.

2.

Brief facts are, the assessee a company filed its return of income for the impugned assessment year on 27th November 2006, declaring

2 M/s. Rhodia Specialty Chemicals (I) Ltd. total income of ` 10,64,81,260. The Assessing Officer while completing the assessment for the impugned assessment year under section 29th 143(3) on December 2008, made various additions / disallowances one amongst them being an amount of ` 25,30,000 claimed as deduction on account of salvage of material loss in flood. Though, the assessee challenged the addition made before the learned Commissioner (Appeals), however, the learned Commissioner (Appeals) confirmed the addition. Against the order of the learned Commissioner (Appeals), assessee went in further appeal before the Tribunal.

3.

On the basis of additions confirmed by the learned Commissioner (Appeals), the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) by issuing a show cause notice to the assessee. Though, the assessee objected to imposition of penalty, however, the Assessing Officer rejecting the objections / explanations of the assessee, imposed penalty of ` 16,42,284, on the basis of additions made. Being aggrieved of the penalty order passed by the Assessing Officer assessee preferred appeal before the learned Commissioner (Appeals).

4.

The learned Commissioner (Appeals), while disposing off the assessee’s appeal deleted the penalty in respect of various additions.

3 M/s. Rhodia Specialty Chemicals (I) Ltd.

However, in respect of addition of ` 23.50 lakh on account of salvage of raw material, the learned Commissioner (Appeals) confirmed penalty imposed under section 271(1)(c).

5.

Learned Authorised Representative submitted, the Tribunal while deciding assessee’s appeal challenging the aforesaid addition had restored the issue back to the file of the Assessing Officer for deciding afresh, hence, the imposition of penalty cannot survive as the addition no longer exists.

6.

Learned Departmental Representative fairly submitted that the addition on the basis of which penalty was imposed has been restored back to the file of the Assessing Officer.

7.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, the addition on the basis of which the penalty under section 271(1)(c) was sustained by the learned Commissioner (Appeals) is an amount of ` 23.50 lakh claimed as salvage value of damaged items. On a perusal of the order dated 13th May 2015, passed by the Tribunal, while deciding assessee’s appeal in ITA no.5985/Mum./2010, challenging the aforesaid addition, we have noted that the Tribunal has restored the issue relating to the aforesaid addition to the file of the Assessing Officer for deciding afresh. That being the case, the addition on the 4 M/s. Rhodia Specialty Chemicals (I) Ltd.

basis of which the penalty was imposed no more survives. Consequently, penalty imposed under section 271(1)(c) on the basis of such addition cannot also survive, at least, for the present. Accordingly, we set aside the impugned order of the learned Commissioner (Appeals) by deleting the penalty imposed.

8.

In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 12.08.2016

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