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Issues involved: Appeal against cancellation of penalty order u/s 271(1)(c) by CIT(A) due to setting aside of quantum appeal by ITAT.
Summary: The appeal by the Revenue was against the CIT(A)'s cancellation of the penalty order u/s 271(1)(c) as the quantum appeal was set aside by the ITAT and restored to the Assessing Officer (A.O.) for fresh consideration. The Revenue raised two grounds challenging the CIT(A)'s decision and contended that it was contrary to certain decisions of the Hon'ble Madras High Court. The facts of the case involved the A.O. not allowing the exemption claimed u/s 10A and initiating penalty proceedings u/s 271(1)(c). The CIT(A) rejected the appeal, stating the claim was made wrongly. The ITAT then set aside the order passed u/s 144 and restored it to the A.O. for fresh examination, leading to the cancellation of the penalty order by the CIT(A). The Tribunal found no reason to interfere with the CIT(A)'s order as the basis for initiating penalty proceedings had been set aside by the ITAT. The Revenue's second ground, citing decisions of the Hon'ble Madras High Court, was dismissed as the facts of those cases were different from the present case. Referring to the judgments of Hind Mercantile Corporation and Ramakrishna Sons (P) Ltd., the Tribunal emphasized the requirement of an alive assessment order for considering penalty on merits. Since the assessment order in this case was set aside, the CIT(A) rightly cancelled the penalty without delving into the merits. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal, allowing the A.O. to consider initiating penalty proceedings afresh while completing the assessment. In conclusion, the Tribunal upheld the CIT(A)'s decision to cancel the penalty order u/s 271(1)(c) due to the setting aside of the assessment order, and dismissed the Revenue's appeal.
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