SURINDER KUMAR SINGAL,CHANDIGARH vs. ACIT, C-5(1), CHANDIGARH

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ITA 73/CHANDI/2018Status: DisposedITAT Chandigarh04 September 2018AY 2008-092 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the addition on which the penalty was based was deleted, the penalty itself cannot survive. Therefore, the penalty order was quashed.

What were the facts?

The assessee appealed against a penalty order for the assessment year 2008-09. The penalty was levied on an addition made by the Assessing Officer, which was subsequently deleted by the ITAT in a prior order.

What were the issues?

The primary issue was whether a penalty can be sustained when the underlying addition has been deleted by a higher appellate authority. The assessee also raised an issue regarding the ex-parte nature of the order due to non-receipt of notice.

Which sections of the Income-tax Act were involved?

Section 57(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCHES ‘B’, CHANDIGARH

Before: MS. DIVA SINGH & MS. ANNAPURNA GUPTA

For Appellant: Shri N.K.Saini
For Respondent: Shri Ankur Alya, JCIT (DR)
Hearing: 07.08.2018Pronounced: 04.09.2018

PER DIVA SINGH

The present appeal has been filed by the assessee assailing the correctness of the order dated 29.11.2017 of CIT(A)-2 Chandigarh pertaining to the 2008-09 assessment year.

2.

Although the assessee by way of a ground No. 1 has the ex-parte order alleging that no notice for the specific date of hearing has been received, however, the ld. AR inviting attention to ground No. 2 submitted that the penalty order itself does not survive in view of the fact that in the quantum order, the addition made by the AO has been deleted by the ITAT. Attention was invited to order wherein the cross appeals of the revenue and the assessee were decided by order dated 16.06.2016 in ITA- 1100/CHD/2014 and ITA 1023/CHD/2014. Referring to copy of the same available at pages 4 to 11 of the Paper Book filed attention was invited to the facts considered by the ITAT in para 9 of the said order wherein after considering the submissions of the parties, the addition sustained by the CIT(A) was also deleted by the ITAT. The relevant extract relied upon is reproduced hereunder : 11. I have heard rival submissions and perused the material on record. The ld. counsel for the assessee referred to statement of assessable income (PB-13) to show that income from other sources earned was shown in a sum of Rs. 5,88,530/- which includes income

ITA 73/CHD/2018 A.Y.2008-09 from interest, FDR and LIC commission. The assessee claimed interest amount of Rs. 5,56,933/- as deduction under section 57(iii) from the above income. The ld. counsel for the assessee referred to PB-24 which is the copy of the HDFC bank account to show that on 05.10.2007, there is HDFC loan amount of Rs. 98,03,291/-. On the same day, amount of Rs. 85 lacs was advanced to M/s Aar Kay Innovations Ltd. Further, on 06.10.2007, the loan of Rs. 7,60,000/- was advanced to National Woollen Mills. The ld. counsel for the assessee also filed details of nexus between HDFC loan and loan advanced to the above two parties and others. These details on record clearly support the claim of the assessee that loan taken from HDFC bank has been utilized for the purpose of earning interest income on advancing loan to these two parties and others. Thus, the assessee has earned income from “other sources” against which interest paid to HDFC bank was also related to earning of income from other sources. The interest paid was, therefore, laid out or expanded wholly and exclusively for the purpose of making or earning such income from “other sources”. The Assessing Officer disallowed 80% of the interest income meaning thereby expenditure have been incurred for earning income from other sources. The assessee, in this way, has been able to explain that there was nexus between expenditure incurred for earning income from other sources. The explanation given by assessee proved that interest expenditure paid to HDFC Bank was for the purpose of earning interest i.e. 'income from other sources'. I, therefore, set aside the order of authorities below and delete entire addition.”

2.1.

Inviting attention to the impugned order and the penalty order, it was his submission that it was this specific addition which was subject matter of penalty. Accordingly, it was his prayer that since the addition has been deleted, the penalty thereon, it was submitted, cannot survive. The said position of the law on facts available on record was not disputed by the ld. Sr.DR.

3.

In the light of the submissions of the parties before the Bench considering the facts and circumstances of the case, the penalty order is directed to be quashed as the penalty in the absence of any addition cannot survive. Said order was pronounced in the Open Court at the time of hearing itself.

4.

In the result, appeal of the assessee is allowed.

Order pronounced in the Open Court on 04.09. 2018. (ANNAPURNA GUPTA) JUDICIAL MEMBER ‘Poonam’ Copy to:

1.

The Appellant

2.

The Respondent

3.

The CIT

4.

The CIT(A)

5.

The DR Asstt.

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