PRADIP SHANTILAL SHAH,,AHMEDABAD vs. ASSTT. COMMISSIONER OF INCOME TAX,, AHMEDABAD

With the assistance of the Ld.AR for the assessee, we note that search action under s.132 of the Act was carried out at the business of the assessee on 28/03/1995. The assessment was completed pursuant thereto determining the total income at Rs.1,21,49,743/-. In the first appeal in quantum proceedings, the CIT(A) granted partial relief of Rs.3,85,000/- therein. The assessee has preferred appeal against the order of the CIT(A) before the ITAT. The Coordinate Bench of ITAT set aside the assessment to the file of the AO. Pursuant thereto, a fresh assessment was framed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") rws 254 wherein addition towards unexplained investment in multiple application of Rs.1,17,64,743/- was made. Further addition of Rs.3,85,000/- was made in respect of unexplained cash deposits with Central Bank of India. The aforesaid addition in quantum assessment was carried to the CIT(A) without any success. The aforesaid order of the CIT(A) in quantum proceedings was carried before the ITAT. The Coordinate Bench of ITAT in the quantum proceedings in ITA No.455-457/Ahd/2011 for AYs 1993-94 to 1995-96 vide order dated 10/08/2016 set aside the aforesaid additions/disallowances to the file of the CIT(A) for re-adjudication of the issue afresh.

On the strength of the Tribunal order, it has been contended by the assessee that since the addition has been set aside and restored to the file

Sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable by him, which shall not be less than, but which shall not exceed three times of the amount of tax sought to be evaded by reason of concealment of income or furnishing of inaccurate particulars of income. In other words, the quantification of penalty is dependent upon addition made to the income of the assessee. Upto and until the issue regarding determination of taxable income is finalized, penalty u/s.271(1)(c) of the Act cannot be imposed upon the assessee. The determination of taxable income of the assessee in quantum proceedings is stated to be subjudice before the first appellate authority. Therefore, the basis of penalty has already been set aside to Commissioner of Income Tax (Appeals). Thus, the penalty on uncertain quantum cannot be confirmed. It will be within the discretion of the revenue authority to initiate penalty against the assessee after determination of taxable income in the set aside proceedings. 5. In view of above discussion, we are of the view that this penalty in the present circumstances is not sustainable. We, thus allow the appeal

In the result, appeal of the assessee is allowed.