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TMI Blog2022 (8) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2011, this Court admitted these Tax Case Appeals on the following substantial questions of law: TCA.No.440 of 2011: "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in cancelling the penalty of Rs.7,87,50,000/- levied under section 271(1)(c) of the Income Tax Act, 1961, even though the assessee had made a false claim of depreciation on the sale and lease back transactions relating to windmills electric generators, where the assessee itself was not the owner of lands on which the generators had been installed and hence could not be treated as owner of the windmills? 2. Whether on the facts and in the circumstances of the case the Income-Tax Appellate Tribunal was right in not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he re-assessment proceedings under Section 143 (3) read with Section 147 was completed on 31.03.2004. As per the re-assessment order, while retaining the disallowances made in the original assessment, further addition and disallowances were made towards broken period interest, depreciation securities etc. Thus, in the re-opened assessment, the total income of the assessee was determined at Rs.48,36,45,000/-. Subsequently, a notice under Section 274 was issued for initiating the penal action under Section 271 (1) (c) of the Act. As against the re-assessment order as well as the penalty proceedings, the assessee filed appeals before the Commissioner of Income Tax (Appeals) and the said appeals were disposed of, by a common order dated 15.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the said assessment, depreciation claimed by the assessee on wind mills amounting to Rs.7,60,00,000/- was disallowed. As the assessee filed inaccurate particulars of their income, notice under Section 274 of the Act was issued proposing to initiate penal action under Section 271 (1) (c) of the Act. Aggrieved by the same, the appellant filed appeal before the Appellate Authority and it was disposed of on 15.10.2004 confirming the disallowance of depreciation. However, a direction was issued to the Assessing Officer to complete the penalty proceedings after providing opportunity to the assessee. Accordingly, an opportunity was given to the assessee and they filed a detailed written submission on 23.02.2006. The Assessing Officer, consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o law. Therefore, the learned counsel sought to allow these appeals by setting aside the order of the Tribunal. 8. Per contra, the learned counsel appearing for the respondent/ assessee would submit that based on the available material, the Commissioner of Income Tax (Appeals) deleted the penalty levied by the Assessing Officer and the same was also affirmed by the Tribunal by the order impugned herein, which does not warrant any interference by this Court. 9. Heard the learned counsel appearing on either side and also perused the materials available on record. 10. It is seen that the penalty proceedings were initiated against the assessee under Section 27(1)(c) on the ground that the assessee made false claim of depreciation and deliber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the assessment years in question, which formed the basis for imposing penalty under section 271(1)(c) of the Act, the Tribunal is justified in holding that the question of imposition of penalty does not arise, as the assessment orders itself were set aside. 12. In this context, it may be relevant to refer to the decision of the Hon'ble Supreme Court in the case of K.C.Builders and another v. Assistant Commissioner of Income Tax [(2004) 265 ITR 0562], wherein, in paragraph 21, it was held as follows: "21.The same view as that of ours has been taken by this Court and the various other High Courts in catena of decisions. 1. CIT vs. Bahri Brothers (P) Ltd. (1987) 61 CTR (Pat) 134: (1987) 167 ITR 880 (Pat). "Held, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1922, the deemed dividend which had been deleted could not form the subject-matter of imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, because, the basis for imposition of penalty had ceased to exist. Therefore, the Tribunal was correct in cancelling the penalty imposed on account of the addition." 5. CIT vs. Bedi and Co. (P) Ltd. (1990) 183 ITR 59 (Kar) "Held, that, in view of the conclusion reached by the High Court that the amount in question was not assessable, there was no basis for the imposition of penalty. The cancellation of penalty was valid. [The Supreme Court has dismissed the special leave petition filed by the Department against this judgment of the High Court in relation to penalty und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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