Mamta Silk Mills Pvt.Ltd.,, Surat vs Assessee

This is the assessee's appeal against the order of Ld. CIT(A)-I, Surat dated 30-08-2011 for A.Y. 2006-07.

I.T.A No. 2401/Ahd/2011 A.Y. 2006-07 Page No 2 Mamta Silk Mills Pvt Ltd vs. ITO

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is a company stated to be engaged in the business of dying and printing of art silk cloth and resale of art silk cloth. Assessee electronically filed its return of income for A.Y. 2006-07 on 27-07-2006 showing total income at Rs. Nil. The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order dated 09-10- 2008 and the total income before adjustment of unabsorbed depreciation was determined Rs. 44,75,455/-. Whiling framing the assessment, remuneration paid to directors to the extent of Rs. 3,60,000/- was disallowed and added to the income. On the addition made on account of disallowance of remuneration to directors, AO vide penalty order dated 16- 03-2011 levied penalty of Rs. 1,22,974/- u/s. 271(1)(c) of the Act. Aggrieved by the aforesaid penalty order levied by AO, Assessee carried the matter before CIT(A) who vide order dated 30th August, 2011 upheld the penalty levied on the directors' remuneration. Aggrieved by the aforesaid order of CIT(A), Asssesse is now in appeal and has raised the following ground:-

"1. On the facts and in circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in partly confirming the action of the Assessing Officer in levying penalty u/s. 271(1)(c) of the IT Act, 1961 on account of disallowance of expenditure in relation to payments to directors of Rs. 3,60,000/-"

4. Before us, at the outset, Ld. AR submitted that against the quantum addition of disallowance of directors' remuneration, Assessee had preferred appeal before Tribunal. Tribunal vide order dated 25-10-2011 in ITA No. 2405/Ahd/2009 had restored the issue to the file of AO and I.T.A No. 2401/Ahd/2011 A.Y. 2006-07 Page No 3 Mamta Silk Mills Pvt Ltd vs. ITO directed the AO to re-adjudicate the issue afresh in accordance with law and in view of the directions of the Tribunal in A.Y. 2005-06. He also placed the copy of the aforesaid order. Ld. AR therefore submitted that since the issue of quantum addition has been remitted to AO, the issue of penalty may also be set aside to the file of AO. Ld AR also submitted that on identical facts in A.Y. 2005-06, the penalty on the similar addition made was restored to AO. He also placed on record the copy of the aforesaid order in ITA No. 1966/Ahd/20011 order dated 19-02-2015. Ld. DR on the other hand did not seriously object to the submission made by the AR of restoring the issue back to AO.

5. We have heard the rival submissions and perused the material on record. It is undisputed fact that addition on account of directors' remuneration was made by AO in A.Y. 2006-07 and against which assessee had preferred appeal before Tribunal. The Co-ordinate Bench of Tribunal, while deciding the issue in ITA No. 2405/Ahd/2009 had remitted the issue to the file of AO with certain directions contained therein. We also find that on the issue of penalty on the addition made on account of directors' remuneration in A.Y. 2005-06, the issue was remitted to the file of AO by the Co-ordinate Bench of Tribunal. Since the facts of the case in the year under appeal are identical to that of A.Y. 2005-06 and since the matter with respect to quantum addition for the assessment year under consideration is before AO, we are of the view that the issue of penalty should also be remitted before AO to decide it afresh. We therefore in the interest of justice restore the penalty matter to AO and direct him to decide the same in accordance with law including the outcome of the quantum proceeding and after providing reasonable opportunity of hearing to the assessee. In the result, this ground of assessee is allowed for statistical purposes.

I.T.A No. 2401/Ahd/2011 A.Y. 2006-07 Page No 4 Mamta Silk Mills Pvt Ltd vs. ITO

6. Thus, the appeal of Assessee is allowed for statistical purposes.

Order pronounced in open court on the date mentioned hereinabove at caption page

Sd/- Sd/-

(SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 13/03/2015 ak

आदे श क ूितिल प अमे 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/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद