2022 (12) TMI 1518 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessment was reopened for claiming excess loss - HELD THAT - The Hon ble Bombay High Court in the case of CIT vs.- Jet Airways 2010 (4) TMI 431 - HIGH COURT OF BOMBAY Ranbuxy Laboratories 2011 (6) TMI 4 - DELHI HIGH COURT and Md. Juned 2013 (2) TMI 292 - GUJARAT HIGH COURT propounded unanimously that unless an addition is being made in a reassessment order on an item for which assessment was reopened no other item can be added. There is no application of mind at the end of the ld. A.O. either in the assessment order or in the penalty proceedings. He has not categorically proved that assessee has concealed the income or furnished the inaccurate particulars. As observed above there is an inherent contradiction even for opening of the assessment vis-a-vis ultimate additions made in the hands of the assessee. On this strength of the Hon ble three High Courts decision this addition itself would not be sustainable though the issue is not before us and we cannot express our opinion about that in the present proceedings but we can take cognizance of this fact for absolving the assessee from levy of penalty under section 271(1)(c) of the Income Tax Act. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against penalty imposition under section 271(1)(c) for A.Y. 2010-11.

Detailed Analysis:

1. Grounds of Appeal:
The assessee appealed against the penalty of Rs. 3,09,766 imposed by the Assessing Officer under section 271(1)(c) for A.Y. 2010-11.

2. Assessment Order and Reopening:
The assessment order was passed under section 144 read with section 148, where the Assessing Officer added Rs. 11,53,930 to the total income of the assessee. However, the reasons for reopening the assessment mentioned a loss of Rs. 4,64,800. The discrepancy in the additions made in the assessment order and the reasons for reopening raised questions about the proper enquiry conducted by the Assessing Officer.

3. Quantum Proceedings and Penalty Appeal:
The quantum appeal was pending before the 1st Appellate Authority, but the penalty was already imposed. The Tribunal decided to adjudicate the appeal without waiting for the quantum proceedings' finalization, as the penalty appeal should ideally be decided after the quantum proceedings are concluded.

4. Legal Precedents and Contradictions:
Legal precedents established that if an assessment is reopened for a specific item, no other unrelated item should be added. In this case, the assessment was reopened for loss but profit was added, indicating a lack of proper assessment. Moreover, there were defects in the penalty proceedings, as the show-cause notice mentioned different assessment years, creating ambiguity and lack of specific charges against the assessee.

5. Decision and Ruling:
Considering the discrepancies in the assessment order, reasons for reopening, and penalty proceedings, the Tribunal allowed the assessee's appeal, quashing both the order of the CIT(Appeals) and the penalty order. The Tribunal found that the penalty was not justified due to the inconsistencies and lack of proper assessment by the Assessing Officer.

This detailed analysis of the legal judgment highlights the issues involved, discrepancies in the assessment process, legal precedents, and the final decision of the Tribunal in favor of the assessee, emphasizing the importance of proper assessment and penalty imposition procedures.