2018 (2) TMI 104 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - documents seized and found in search - addition on account of unexplained investment in money lending business - Held that - Tribunal has remitted the issue back to Assessing Officer to re-examine the seized material and to find if any cash transactions is recorded in the name of assessee i.e. Shri Nanchand B. Shah and Shri Nanchand Bhogilal Shah and to make addition of the same in accordance with law. However in principle the Tribunal has set aside the findings of Commissioner of Income Tax (Appeals). Once the substratum for levying penalty has eroded the penalty proceedings would not survive. Therefore no useful purpose would be served by restoring penalty proceedings to the Assessing Officer. - Decided in favour of assessee

Summary

Issues:
Levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 based on additions made during assessment years.

Analysis:
The judgment involved six appeals by the assessee against the order of Commissioner of Income Tax (Appeals) confirming the penalty levied u/s. 271(1)(c) of the Income Tax Act, 1961. The additions were made based on unaccounted interest income, unexplained investment in money lending business, disallowance of property tax, and expenses for various assessment years. The Assessing Officer initiated penalty proceedings and levied penalties ranging from Rs. 1,28,900 to Rs. 6,74,526 for different assessment years. The Commissioner of Income Tax (Appeals) confirmed the penalty, leading to the appeals before the Tribunal.

The assessee argued that the Tribunal had deleted the entire addition in quantum appeals for the same assessment years, hence no penalty should be levied. However, the Department contended that the Tribunal had directed the Assessing Officer to investigate further, indicating that the penalty should be upheld until completion of the additional investigation. The Tribunal reviewed the orders and noted that the Co-ordinate Bench had allowed the appeals of the assessee and deleted the additions. The Tribunal directed the Assessing Officer to re-examine the seized material to determine if any cash transactions were recorded in the name of the assessee, and to make additions if necessary.

Ultimately, the Tribunal found that since the Tribunal had set aside the findings of the Commissioner of Income Tax (Appeals) and remitted the issue back to the Assessing Officer for further examination, the basis for levying the penalty had eroded. As a result, the penalty proceedings were deemed unnecessary as the substratum for the penalty had been removed. The Tribunal allowed the appeals of the assessee, setting aside the impugned order and concluding that no useful purpose would be served by restoring the penalty proceedings to the Assessing Officer. The Tribunal clarified that if the Assessing Officer found cash transactions in the name of the assessee during further examination, penalty proceedings could be initiated in accordance with the law.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals of the assessee, emphasizing that the penalty proceedings were no longer necessary due to the remittance of the issue back to the Assessing Officer for further investigation.