Shri Madan Hada, Kanpur vs Department Of Income Tax

This appeal is preferred by the Revenue against the order of the ld. CIT(A) deleting the penalty of Rs.25 lakhs levied under section 221(1) of the Income-tax Act, 1961 (hereinafter called in short "the Act") in making payment of taxes on wrong appreciation of facts.

2. During the course of hearing, the ld. counsel for the assessee has invited our attention that the penalty was levied by the Assessing Officer for the addition made in the hands of the assessee on protective basis. The substantive addition was made in the hands of M/s Pravesh Casting Pvt. Ltd. and M/s Monga Metals Pvt. Ltd. On the point of quantum addition, the appeal was disposed of by the Tribunal in I.T.A. No. 1387/Alld/97 vide its order dated 30.1.2014 and restored the matter to the file of the Assessing Officer for verification of facts with regard to the additions made on :-2-:

protective basis vis-à-vis the additions made on substantive basis. Since it has not been finally decided in whose hands the additions are to be sustained, the penalty under section 221(1) of the Act cannot be levied in the hands of the assessee. The ld. CIT(A) has noted that in the case of protective assessment, tax cannot be recovered, therefore, penalty levied under section 221(1) of the Act is not sustainable in the eyes of law.

3. The ld. D.R. has simply placed reliance upon the order of the Assessing Officer.

4. Having carefully examined the orders of the lower authorities, we find that the penalty under section 221(1) of the Act was levied on the additions made in the hands of the assessee on protective basis whereas substantive additions were made under different hands. In quantum appeal, the matter was restored to the Assessing Officer for verification. In the light of these facts, we find ourselves in agreement with the ld. CIT(A) that on protective assessment, tax cannot be recovered. Therefore, penalty under section 221(1) of the Act is not sustainable in the hands of the assessee. Accordingly we confirm the order of the ld. CIT(A).

5. In the result, appeal of the Revenue is dismissed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:27th February, 2015 JJ:2602 :-3-:

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar