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Income Tax Appellate Tribunal, BANGALORE ‘B’ BANGALORE
Before: SHRI N.V.VASUDEVAN & SHRI S. RIFAUR RAHMAN
PER SHRI S. RIFAUR RAHMAN, AM; These two appeals for the assessment years 2006-07 and 2007- 08 of the assessee company are directed against the orders of the learned CIT (A)-I, Bangalore, dated 20.02.2014.
The assessee is a company engaged in the business of export of ready made garments. In both the assessment years two additions were made by the AO to the income returned by the Assessee and assessment was completed u/s.143(3) of the Act. The first addition was disallowance of “Info and Tracking Delivery Schedules” and the second addition was ITA Nos.756 & 757(B)/14 disallowance of staff welfare and other expenses. The Assessee filed appeal against the aforesaid additions before CIT(A). The CIT(A) deleted the first addition and confirmed the second addition. Against the reliefs allowed both the Assessee and Revenue filed appeals before the Tribunal.
The tribunal set aside the order of CIT(A) on both the issues and resorted the issues to AO for fresh consideration.
3. In the meanwhile the AO imposed penalty in respect of the additions made in the assessment u/s.271(1)(c ) of the Act. The CIT(A) after noticing that the additions made by the AO no longer survived held that the appeal of the Assessee is infructuous as the additions made by the AO have been set aside to AO for de novo consideration by the Tribunal.
Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal The Assessee has, in its grounds of appeals for both the assessment years under consideration, raised an identical only ground which, reads as follows:
“that the order of the learned CIT (A) was erroneous in law in rejecting the appeal of the assessee without providing any valid reason to hold that the appeals have become in-fructuous and not maintainable.’
As the issue raised in these appeals is similar for both the assessment years, they were heard together and disposed of by this common order.
ITA Nos.756 & 757(B)/14
We have duly considered the submissions of both the parties. We have also carefully perused the reasoning of the CIT (A) in coming to a conclusion that the appeals preferred by the assessee company for both the assessment years have become in-fructuous. At the outset, we would like to refer to the fact that the additions made in the original assessment orders [u/s 143(3) of the Act dated 8.12.2009 and 29.12.2009 for the AYs 2006-07 and 2007-08 respectively were challenged by the assessee company before the then CIT (A) who after due consideration of the assessee’s submission confirmed certain additions for both the AYs thereby allowed partial relief to the assessee.
Aggrieved by the findings of the then CIT (A), the assessee company had approached the Tribunal for relief. The earlier Bench of this Tribunal vide its consolidated order in & 1243/B/2010 and ITA Nos.1269 & 1270/B/2010 restored the matters on the files of the AO for fresh consideration [Refer: Para 3.4. of the CIT (A)’s order dt.20.2.2014 for the AY 2006-07]. In consonance with the directions of the Tribunal (supra), the AO had concluded the re-assessment proceedings u/s 143(3) r.w.s. 254 of the Act dated 23.01.2014 and, accordingly, issued notices u/s 274 r.w.s 271 of the Act on 23.01.2014. Thus, it is implicit that the initiation of penal proceedings and subsequent imposing of penalties u/s 271(1)(c) of the Act for both the AYs based on the original assessment orders made u/s 143(3) of the Act on 8.12.2009 and ITA Nos.756 & 757(B)/14 29.12.2009 for the AYs 2006-07 and 2007-08 respectively have become redundant. We are, therefore, of the firm view that the CIT (A) ought to have cancelled the original order of the AO imposing penalty. He ought not to have held that the appeals were infructuous. The question whether the penalty can be imposed u/s.271(1) ( c) of the Act on the Assessee in the set aside proceedings has to be left open. The original order imposing penalty cannot stand because the original assessment order based on which the said penalty proceedings were initiated were set aside and no longer survived.
We therefore hold that the original order imposing penalty deserves to be cancelled and accordingly the same is cancelled. The penalty proceedings initiated in the set aside proceedings will however continue.
In the result, the assessee’s appeals for the AYs 2006-07 and 2007-08 are allowed.
Order pronounced in the open court on the 4th September, 2015.