2009 (4) TMI 1064 - AT - Income Tax

Penalty imposed u/s 271(1) if returned income is a loss - CIT(A) deleted penalty levied holding that the issue is covered with the decision of the Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd. 2007 (2) TMI 147 - Supreme Court and as the returned income and assessed income in these cases are a loss figure, the penalty u/s. 271(1)(c) cannot be imposed - HELD THAT - We find that the decision of the Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd. (supra) stands over ruled with the decision of the Apex Court in the case of CIT v. Gold Coin Health Food Pvt. Ltd. 2008 (8) TMI 5 - Supreme Court . However, since the penalties imposed u/s. 271(1)(c) in these cases were not decided on the merits thereof and the CIT(A) has recorded that there is no need to adjudicate the issue on merits of the case in view of the decision in the case of Virtual Soft Systems Ltd. (supra), we hold that it shall be in the interest of justice to set aside the issue in all these appeals to the file of CIT(A) with direction to adjudicate the appeals of the assessee de novo, on merits, after affording reasonable opportunity of being heard to the parties.

Summary

Issues:
- Appeal against the order of CIT (Appeals) for A.Y 1993-1994, 1996-1997 & 1997-1998 regarding the deletion of penalty under section 271(1)(c).

Analysis:
The appeals were filed by the Revenue against the common order of CIT (Appeals) for three assessment years. The main issue raised in all appeals was whether the penalty imposed under section 271(1)(c) should be deleted. During the hearing, the assessee did not appear, and their application for adjournment was rejected. The appeals were decided ex parte, with the Revenue represented by the learned DR who relied on the order of the AO.

Upon reviewing the submissions and orders, the ITAT found that the CIT (Appeals) had deleted the penalties based on the decision of the Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd. v. CIT 289 ITR 83. However, this decision was later overruled by the Apex Court in the case of CIT v. Gold Coin Health Food Pvt. Ltd. 304 ITR 308 (SC). Since the penalties were not decided on their merits and the CIT (Appeals) did not adjudicate the issue further, the ITAT decided to set aside the matter and directed the CIT (Appeals) to re-examine the appeals of the assessee on merits after providing a reasonable opportunity for both parties to be heard.

As a result, the appeals of the Revenue were allowed for statistical purposes, and the issue of penalty imposition under section 271(1)(c) was remanded back to the CIT (Appeals) for fresh consideration in light of the Supreme Court's decision in the case of CIT v. Gold Coin Health Food Pvt. Ltd.