Lucky Dyeing Mills Pvt.Ltd.,, Surat vs Assessee

Lucky Dyei ng Mills Pvt. Income Tax Officer, W ard:1 Ltd, Plot No. 1 to 9, Opp. (4), Surat BRC, Udhna, Surat Vs (Respondent) PAN: AAACL4047R (Appellant)

Assessee by: Shri Rajesh M. Upadhyay, A.R. Revenue by: Shri B.L. Yadav, Sr. D.R.

Date of heari ng : 14-05-2015 Date of pronouncement : 22-05-2015

आदेश /ORDER

PER : RAJPAL YADAV, JUDICIAL MEMBER:-

The assessee is in appeal against the order of Ld. CIT(A)-I dated 23th June, 2010 passed for assessment year 2005-06.

2. The grievance of the assessee is that Ld. CIT(A) has erred in confirming the penalty imposed u/s. 271(1)(c) of the Income Tax Act.

I.T.A No. 2679/Ahd/2011 A.Y. 2005-06 Page No 2 Lucky Dyeing Mills Pvt. Ltd vs. ITO

3. Brief facts of the case are that assessee has filed its return of income on 30st October, 2005 declaring nil income. An assessment order has been passed u/s. 143(3) on 28-12-2007. Ld. Assessing Officer has made additions of Rs. 10,00,325/- which ultimately set off against the un- absorbed depreciation. The additions made by the Assessing Officer are as under:-

"Particulars of Additions/Disallowance made in the Assessment order: Amount A. Understatement of Gross Profit :Rs.5,96,063/- B. Un-explained expenditure u/s. 69C of the Act :Rs. 3,40,403/-

C. Out of Books purchases Rs. 63,859/- ------------------- Total of addition/disallowance made in the assessment Rs.10,00,325/-

order on which penalty proceedings u/s. 271(1)(C) of the Act were initiated."

4. The Assessing Officer has initiated penalty proceedings against the assessee u/s. 271(1)(c). Ld. Assessing Officer has observed that addtioin of Rs. 63,859/- was deleted by the CIT(A), therefore he excluded this addition while computing the penalty. Accordingly, he imposed a penalty of Rs. 3,27,763/- which is equivalent to tax sought to be evaded by the assessee on the additions of Rs. 9,36,466/- (i.e. Rs. 5,96,063/-+ Rs.3,40,403/-).

5. Appeal to the CIT(A) did into bring any relief to the assessee.

6. Learned counsel for the assessee at the outset placed on record copy of the Tribunal's order passed in ITA No. 248/Ahd/2009 and contended that the addition at serial A has been deleted by the ITAT and the addition of Rs. 3,40,403/- has been set aside to the Assessing Officer for re-adjudication. Therefore, both the amounts do not survive for visiting I.T.A No. 2679/Ahd/2011 A.Y. 2005-06 Page No 3 Lucky Dyeing Mills Pvt. Ltd vs. ITO

the assessee with a penalty. Ld. DR was unable to controvert the contentions of learned counsel for the assessee.

7. Section 271(1)(c) of the Act has a direct bearing on the controversy and, therefore, it is salutary upon us to take note of the relevant provisions of section 271(1)(c) along with Explanation 1 which read as under:

"271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the of course of any proceedings under this Act, is satisfied that any person

(a) and (b)** ** **

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty.

(i)and (Income-tax Officer,)** ** **

(iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits:

Explanation 1- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or I.T.A No. 2679/Ahd/2011 A.Y. 2005-06 Page No 4 Lucky Dyeing Mills Pvt. Ltd vs. ITO

(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this sub-

section, be deemed to represent the income in respect of which particulars have been concealed."

8. A bare perusal of sub-clause III would indicate that penalty will be computed on the additions made representing the taxes sought to be evaded. Once additions were deleted by higher appellate authority, there cannot be any computation of penalty. In other words, there are no amounts for which assessee can be charged that it has evaded the taxes on those amounts. Therefore, no penalty is imposable upon the assessee. Since one of the issues has been remitted to the Assessing Officer for adjudication, it is for the Assessing Officer to initiate or not to initiate the penalty u/s. 271(1)(c) on that issue after conclusion of that issue. At this stage, no penalty is imposable.

9. In view of the above, discussion, we allow the appeal of the assessee and quash the penalty order.

Order pronounced in the open court on 22-05-2015

Sd/- Sd/-

(G.D. AGRAWAL) (RAJPAL YADAV) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 22/05/2015 ak I.T.A No. 2679/Ahd/2011 A.Y. 2005-06 Page No 5 Lucky Dyeing Mills Pvt. Ltd vs. ITO

आदेश क त ल प अ े षत / Copy of Order Forwarded to:-

1. Assessee

2. Revenue

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Ahmedabad

6. Guard file.

By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद