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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI G.D. AGRAWALG.D. AGRAWAL & AND BEFORE SHRI G.D. AGRAWALG.D. AGRAWAL & AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARGSHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG
PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP :- PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP This appeal by the Revenue for the assessment year 1995-96 is directed against the order of learned CIT(A)-VIII, New Delhi dated 27th August, 2013.
The grounds raised by the Revenue in this appeal read as under:-
“1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the penalty u/s 271(1)(c) of Rs.7,99,430/- as all the assets and liability of Sh. Suresh Chand Mangal Prop. Of M/s S.C. Mangal & Co. have been purchased by M/s Moongipa Securities Ltd. as per the decree passed by the Hon. High Court of Delhi and is liable to pay the penalty as part of liability of the purchased business?
2. That the order of the ld.CIT(A) is erroneous and is not tenable on facts and in law.
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That the grounds of appeal are without prejudice to each other.
4. That the appellant craves leave to add, alter, amend or forgo any ground(s) of the appeal raised above at the time of the hearing.”
3. At the outset, it is stated by the learned counsel that the ground raised by the Revenue is misconceived and not arising out of the order of learned CIT(A) because learned CIT(A) has not deleted the penalty as challenged in the ground of appeal. On the other hand, learned CIT(A) only held that the penalty levied upon Shri S.C. Mangal cannot be recovered from the assessee, i.e., M/s Moongipa Securities Limited. He further pointed out that Hon'ble Jurisdictional High Court has already decided this issue in the case of the assessee vide order dated 20th November, 2013. Copy of the order is placed on record and it was pointed out that Hon'ble Jurisdictional High Court has held that the amount of penalty cannot be recovered from the assessee unless the Revenue passes an order u/s 170(3) of the Income-tax Act, 1961.
Learned DR, on the other hand, relied upon the order of the Assessing Officer and he stated that the matter may be set aside to the file of the Assessing Officer for passing the order u/s 170(3) of the Act.
We have considered the rival submissions and have perused the relevant material placed before us. The undisputed facts are that the Assessing Officer levied penalty u/s 271(1)(c) of the Act for assessment year 1995-96 amounting to `7,99,430/- in the case of Shri S.C. Mangal, proprietor of M/s S.C. Mangal & Co. However, the demand notice against this levy of penalty was served upon the assessee, i.e., M/s Moongipa Securities Limited, because, by the time the penalty order was passed, the business of M/s S.C. Mangal & Co. was taken over by the assessee company, i.e., M/s Moongipa Securities Limited. The 3 ITA-5944/Del/2013 assessee has challenged the recovery of the amount of penalty from it before the learned CIT(A) as well as by filing the writ petition before Hon'ble Jurisdictional High Court. Learned CIT(A) cancelled the demand notice with the following order:-
“7.4 In light of the above, it is held that the demand raised on the appellant company of Rs.7,99,430/- for assessment year 1995-96 in pursuance to orders u/s 271(1)(c) of the Act on Shri Suresh Chand Mangal by way of notice of demand dated 30.9.1998 is not valid and therefore cancelled.”
The Revenue, aggrieved with the order of learned CIT(A), is in appeal before us. However, in the grounds of appeal, the Revenue has mentioned that learned CIT(A) is not justified in deleting the penalty u/s 271(1)(c) of `7,99,430/-. From the order of learned CIT(A), we find that the CIT(A) has not cancelled the penalty but he has only held that the demand raised on the appellant company in respect of the penalty of Shri S.C. Mangal is not valid. Thus, the ground raised by the Revenue in its appeal is misconceived and not arising out of the order of learned CIT(A).
7. However, Hon'ble Jurisdictional High Court has also passed order dated 20th November, 2013 in Writ Petition (Civil) No.6531/1998 on the identical issue and, in paragraph 22, held as under:-
“22. The writ petition is accordingly partly allowed. It is directed that the penalty amounts under Section 18(1)(c) of the WT Act relating to assessment years 1991-92 and 1992-93 cannot be recovered from the petitioner. With regard to the income tax demand including penalty for the assessment year 1995-96, relating to S.C. Mangal, it is open to the respondents to initiate recovery proceedings after deciding the dispute by passing an order under Section 170(3), the assessing officer will decide whether penalty amount under Section 271(1)(c) of the IT Act can be recovered from the petitioner, even when the liability was determined subsequent to the date of succession.
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Petitioner, if aggrieved, by the said order will be entitled to file an appeal and question the same. The writ petition is disposed of. No costs.”
From a reading of the above order, it is evident that as per Hon'ble Jurisdictional High Court, the recovery of the penalty u/s 271(1)(c) for assessment year 1995-96 relating to Shri S.C. Mangal can be made from the assessee only after the order u/s 170(3) of the Income-tax Act is passed. Admittedly, till the order of the CIT(A), no such order was passed by the Revenue. Therefore, so far as the order of learned CIT(A) is concerned, we find no justification to interfere with it. Accordingly, the same is sustained. However, before we part with the matter, we may mention that the Assessing Officer is at liberty to act as per the observation of Hon'ble Jurisdictional High Court in Writ Petition (Civil) No.6531/1998, order dated 20th November, 2013. Subject to this remark, the appeal filed by the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed. Decision pronounced in the open Court on 17.12.2015.