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2015 (5) TMI 400 - AT - Income TaxPenalty u/s 271(1)(c) - Tribunal has deleted first enhancement made by the ld. CIT(A) and restored the issues in respect of remaining three enhancements to the AO for a fresh consideration - Held that - there can be no question of sustaining any penalty, at this stage, on the enhancements so made. There can be no penalty on the amount of enhancement deleted by the tribunal. On the enhancements restored to the AO, the question of penalty can be examined only by the AO pursuant to the making of fresh assessment. The impugned order is set aside and the instant penalty on such restored issues is sent back to the AO for taking an appropriate decision after the finalization of the fresh assessment pursuant to the tribunal order. - Following decisions of Mohd. Mohatram Farooqui vs. CIT 2010 (2) TMI 1122 - SUPREME COURT and Sanjay Gupta vs. CIT 2014 (5) TMI 860 - DELHI HIGH COURT - Decided in favour of assessee.
Issues:
Assessment of penalty under section 271(1)(c) of the Income-tax Act, 1961 in relation to the assessment year 2007-08 based on enhancements made by the ld. CIT(A) - Deletion of first enhancement by the Tribunal and restoration of remaining three enhancements for fresh adjudication - Applicability of penalty on enhancements deleted or restored - Consideration of penalty by the AO after finalization of fresh assessment. Analysis: The appeal pertains to the imposition of a penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2007-08 based on enhancements made by the ld. CIT(A). The ld. CIT(A) had imposed a penalty in relation to total enhancements amounting to Rs. 3168.20 lac, which was determined at Rs. 10,76,87,140/-, being 100% of the tax sought to be evaded. The Tribunal, however, deleted the first enhancement of Rs. 3,044.06 lac and restored the remaining three enhancements to the AO for fresh adjudication. The Tribunal's decision to delete the first enhancement and restore the remaining three enhancements to the AO for fresh consideration led to the conclusion that no penalty could be sustained at that stage on the enhancements made. It was emphasized that there could be no penalty on the amount of enhancement deleted by the Tribunal. Regarding the enhancements restored to the AO, it was established that the question of penalty could only be examined by the AO after the completion of the fresh assessment. This approach aligns with the judgment of the Hon'ble Supreme Court in Mohd. Mohatram Farooqui vs. CIT, which stipulated that if an addition is restored to the AO, the penalty should also be restored. Furthermore, the decision was supported by the judgment of the jurisdictional High Court in Sanjay Gupta vs. CIT, which highlighted that when the quantum is remanded to the AO, the question of penalty on the undisclosed income should also be remanded to the AO. Consequently, the impugned order imposing the penalty was set aside, and the matter was remitted to the AO for determining the penalty or otherwise after the finalization of the fresh assessment as per the Tribunal's restoration on the three enhancements. In conclusion, the appeal was partly allowed, and the decision to remit the penalty issue to the AO after the fresh assessment was in line with legal precedents and the principles of natural justice, ensuring a fair and appropriate consideration of penalty in light of the restored enhancements.
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