2021 (4) TMI 244 - AT - Income Tax

Penalty u/s 271 - income of the assessee was assessed by the A.O vide his order passed under Sec. 144 - Unexplained interest expenses u/s 69C - quantum appeal against the order passed by the A.O under Sec. 144 was filed by the assessee in the course of hearing of the appeal by the CIT(A) against the penalty imposed by the A.O under Sec. 271(1)(c) - HELD THAT - As the fate of the quantum appeal filed by the assessee against the assessment framed by the A.O under Sec. 144, dated 28.12.2016 will have a bearing on the penalty imposed under Sec. 271(1)(c) thus, in our considered view the disposing of the appeal against the penalty imposed by the A.O under Sec. 271(1)(c) would not only be premature, but in fact, the same may also lead to multiplicity of litigation. Accordingly, in all fairness, we are of a strong conviction that in the totality of the facts the order passed by the CIT(A) disposing off the appeal against the penalty imposed by the A.O under Sec. 271(1)(c) requires to be restored to the file of the first appellate authority, with a direction, that the same be taken up after disposing off the quantum appeal for the year in question. We, thus, herein restore the present appeal to the file of the CIT(A) for fresh adjudication after disposing off the quantum appeal which is stated to be pending before him. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Appeal against penalty imposed under Sec. 271(1)(c) of the Income Tax Act, 1961 without disposal of quantum appeal.
2. Sustaining penalty imposed by Assessing Officer under Sec. 271(1)(c) of ?62,98,060.
3. Request for restoration of appeal against penalty to CIT(A) for fresh adjudication after disposal of quantum appeal.

Analysis:
1. The appeal was filed against the penalty imposed under Sec. 271(1)(c) without disposing of the quantum appeal. The assessee contended that the CIT(A) erred in deciding the penalty appeal without first disposing of the appeal against the assessment order. The CIT(A) dismissed the appeal, leading to the current appeal before the ITAT. The ITAT acknowledged the importance of disposing of the quantum appeal before addressing the penalty issue to avoid multiplicity of litigation. The ITAT, therefore, decided to restore the appeal to the CIT(A) for fresh adjudication after the quantum appeal's disposal.

2. The Assessing Officer had imposed a penalty of ?62,98,060 under Sec. 271(1)(c) for disallowing interest expenses claimed by the assessee under Sec. 69C. The CIT(A) upheld the penalty, which was challenged in the current appeal. However, the ITAT did not delve into the merits of the penalty imposed, as the quantum appeal was pending before the CIT(A). The ITAT allowed the appeal for statistical purposes, emphasizing the need to address the quantum appeal first before considering the penalty issue.

3. The assessee requested the restoration of the appeal against the penalty to the CIT(A) for fresh adjudication after the quantum appeal's disposal. The ITAT agreed with the assessee's contention, highlighting the interdependence of the quantum appeal's outcome on the penalty imposed. The ITAT directed the CIT(A) to take up the penalty appeal after disposing of the quantum appeal, ensuring a fair and comprehensive resolution of the issues involved. The ITAT refrained from discussing the penalty's merits, leaving it open for the assessee to raise before the CIT(A) during the subsequent proceedings.