M/S. SHAH CONSTRUCTION CO. LTD,MUMBAI vs. THE DY. CIT CIR 8(3),

The Assessing company has filed the return of income for A.Y. 1990-91 on 26.12.1990 declaring total loss of Rs.6,07,02,250/- and filed the return of income on 30.12.1991, for the A.Y.1991-92 declaring total loss of Rs.1,69,83,300/-. The assessment for the A.Y. 1990-91 was completed on 19.03.1993 whereas the assessment for A.Y. 1991-92 was completed on 07.03.1994 determining the total loss to the tune of Rs.5,43,34,247/- & Rs.1,43,11,044/- respectively. The above said assessments were completed after some disallowance therefore the assessee filed an appeal before learned CIT(A) in both the cases and matter went up to the Income Tax Appellate Tribunal which were subsequently remanded before the Assessing Officer. Thereafter, the Assessing Officer in both the cases reassessed the matter and initiated the penalty u/s. 271(1)(c) which were confirmed by the learned CIT(A) therefore, in both the cases the assessee is now under appeal before us.

We have heard the arguments advanced by the learned representative of the parties and perused the record. The only point which has been argued by the assessee is that initially in the order dated 19.03.1993 for the assessment year 1990-91 and order dated 07.03.1994 for the assessment year 1991-92, the Assessing Officer nowhere ordered &1503/Mum/06 A.Y. 1990-91 & 1991-92 to levy the penalty therefore in the said circumstances the penalty levied by the Assessing Officer in the reassessment of the case is wrong against law and facts and is not liable to be sustainable in the eyes of law in view of the law settled in 2002 Commissioner of Income Tax Vs. V.S.K.Adi Chetty Suravel Chetty of Madras High Court and in view of the law settled in [2009] 310 ITR (AT) 270 (Pune) in case titled as Bhagwandas Associates Vs. Income Tax Officer. On the other hand the learned Departmental Representative supported the order of learned CIT(A) in questions. On appraisal of order dated 19.03.1993 for the assessment year 1990-91 and order dated 07.03.1994 for the assessment year 1991-92. It is observed that both the orders were passed initially by the Assessing Officer by completing the assessment of relevant years but nowhere initiated the penalty in the said orders. No doubt subsequently the matter went up in the appeal on different issues and after the remand of the case reassessment of the relevant assessment years were completed and Assessing Officer initiated the penalty in question which has been upheld by the learned CIT(A) in view of the order under challenge. The only question which has been arose before us is that when the Assessing Officer did not initiated the penalty at the time of initial assessment then in the said circumstances at the time reassessment of the cases on different issues, the penalty can be initiated in accordance with the law or not. Fact and circumstances of both the cases are same. In both the cases the Assessing Officer has disallowed the certain expenditure under Rule 6D and u/s. 145 of the Act. &1503/Mum/06 A.Y. 1990-91 & 1991-92 Thereafter, assessee challenged both the orders. Subsequently matter went up to the Income Tax Appellate Tribunal. After the directions of the ITAT, the matter was reassessed and in both the cases the Assessing Officer initiated the penalty u/s. 271(1)(c) of the Act which were upheld the learned CIT(A) and now is under challenge.

The facts and circumstances of both the cases are same. After the completion of assessment the assessee filed an appeal before learned CIT(A) challenging the disallowance by the Assessing Officer under Rule 6D and u/s. 145 of the Act. No doubt thereafter the matter was remanded back to the concerned Assessing Officer on the basis of certain directions passed by the Income Tax Appellate Tribunal, Mumbai. There is no need to go with the merit of the case since the matter on legal issues has been already decided by the Hon’ble Madras High Court in case titled as Commissioner of Income Tax Vs. V.S.K.Adi Chetty Suravel Chetty. The only difference in this case is that in the instant case penalty was not initiated initially whereas in the said case penalty was deleted by authority subsequently. Since initially the order dated 19.03.1993 for the year 1990-91 and order dated 07.03.1994 for the year 1991-92 nowhere recommended the penalty against the assessee therefore, in the said circumstances, no penalty proceeding can be initiated at the time of remand assessment. In view of the said law, we are of the view that penalty initiated during remand proceeding is wrong against law and facts and is not liable to be sustainable in the eyes of &1503/Mum/06 A.Y. 1990-91 & 1991-92 law. Accordingly, we set aside the penalty order in question and delete the penalty. In brief the appeals of the assessee are hereby allowed.

Accordingly both the appeals filed by the assessee are hereby allowed.