ACIT, NEW DELHI vs. M/S. NAGESHWAR INVESTMENT LTD., NEW DELHI

This is an appeal by the department against the order dated 22.12.2014 of ld. CIT-XXIV, New Delhi.

The only grievance of the assessee in this appeal relates to the deletion of penalty of Rs.11,78,100/- imposed by the AO under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act).

Facts of the case in brief are that the assessee company is engaged in the business of investment, subscribe, buy, sell and hold of shares, stock and debentures etc. A search & seizure action u/s 132 of the Act was carried out in M/s Rajdarbar Group of cases on 31.07.2008. In 2 Nageshwar Investment Ltd. response to the notice u/s 153C of the Act, the assessee filed return of income on 23.08.2008 declaring Nil income. During the course of assessment proceedings, the assessee was asked to explain the loan from various parties amounting to Rs.35,00,000/-. Since the assessee had failed to furnish any explanation with regard to cash credits of Rs.35,00,000/-, the AO made the addition u/s 68 of the Act. Against the said addition, the assessee filed an appeal before the ld. CIT(A) who vide order dated 13.07.2012 had upheld the order of the AO. The AO initiated penalty proceedings u/s 271(1)(c) of the Act and asked the assessee to show cause as to why penalty u/s 271(1)(c) of the Act may not be imposed.

However, none attended on behalf of the assessee nor any reply had been field before the AO. The AO observed that in the quantum assessment, the assessment was finalized after giving proper opportunity to assessee and bringing on records all the material facts of the case. Since the assessee had not filed any reply to show cause notice issued, the AO concluded that the assessee had concealed the income and furnished inaccurate particulars of income in respect of the aforesaid addition. In view of the above stated facts, the AO held that assessee was in default in concealing the income and furnishing inaccurate particulars for the addition amounting to Rs.35,00,000/-. Accordingly, the AO levied penalty of Rs.11,78,100/-.

Being aggrieved, the assessee carried the matter to the ld. CIT(A) who deleted the penalty by observing as under: “The AO has levied the concealment penalty u/s 271(1)(c) of Rs. 26,90,625/-, Rs. 11,78,100/- & Rs. 81,12,060/- for A.Y. 2005-06, 2006-07 and 2007-08 respectively. These penalty orders are based upon the additions/disallowances confirmed by 1st Appellate Authority. However, in the 2nd appeal, the Hon’ble ITAT vide its order dated 28.11.2014 has held the assessment orders invalid & bad in law due to lack jurisdiction to initiate the proceedings u/s 153C. Thus the additions made to the total income in the said assessment orders made u/s 153C r.w.s. 143(3) do not survive. Therefore, the concealment penalty levied on the basis of the additions to the total income made in the orders which have been held as null and void cannot be sustained. Therefore, the concealment penalty levied for the said three years is hereby deleted.”

Now the department is in appeal. The ld. DR relied on the order of the Assessing Officer and submitted that the order of the CIT(A) be set aside and that of the AO be restored.

The ld. AR reiterated the submissions made before the authorities below and submitted that the penalty levied against the additions of Rs. 35,00,000/- on account unexplained cash credits u/s 68 of the Act was challenged before the ITAT wherein vide order dated 28.11.2014, it was held that the assessment orders was invalid and bad in law due to lack of jurisdiction to initiate the proceedings u/s 153C of the Act, as such, the additions made to the total income do not survive. The ld. AR, therefore, submitted that the penalty levied on the basis of the addition which was 4 Nageshwar Investment Ltd. already deleted by the Tribunal could not be sustained. Accordingly, he pleaded that the order of the ld. CIT(A) be upheld.

We have considered the submissions of both the parties and perused the material available on record. We find that the addition on the basis of which the penalty u/s 271(1)(c) of the Act was levied i.e. Rs. 35,00,000/- on account of unexplained cash credits u/s 68 of the Act was deleted by the ITAT vide order dated 28.11.2014 in and the aforesaid order of the Tribunal was upheld by the Hon’ble Jurisdictional High Court vide order dated 20.07.2015 (copy of this order is placed on record). In that view of the matter, we do not see any infirmity in the order of the ld. CIT(A) and the same is upheld. Accordingly, the ground of the appeal taken by the department is dismissed.

In the result, the appeal filed by the department is dismissed. (Order Pronounced in the Court on 04/12/2015)