I-T - Adjudication on issue of penalty cannot be made until addition based on which penalty is imposed is settled and finalized : ITAT
By TIOL News Service
NEW DELHI, JULY 11, 2018: THE ISSUE IS - Whether adjudication on issue of penalty can not be made till the time the addition based on which penalty is imposed is settled and finalized. YES IS THE VERDICT.
Facts of the case
A search and seizure operation was conducted in Jaksons Group of cases on 10.02.2010 and the assessment proceedings were initiated by issuing the notice u/s 153C of the Act. However, no return was filed in response to the notice u/s 153C of the Act. Therefore, the assessment was completed u/s 144 r.w.s. 153C of the Act. Addition on account of unsecured loans and on account of disallowance of expenses were made to the total income of the assessee company. On appeal, CIT(A) partly passed order in favour of assessee. The AO initiated the penalty proceedings u/s 271(1)(c) of the Act on account of addition sustained by the CIT(A). The AO levied the penalty u/s 271(1)(c) of the Act. On appeal, the CIT(A) after considering the submissions of the assessee sustained the penalty imposed. Aggrieved assessee filed appeal before Tribunal.
Tribunal held that,
++ it is noticed that the penalty u/s 271(1)(c) of the Act has been levied by the AO and sustained by the CIT(A) on the basis of the addition made on account of disallowances out of expenses. The said addition was a subject matter of the assessee's appeal in ITA No. 3642/Del/2014 for the assessment year under consideration wherein this issue has been set aside to the file of the CIT(A) to be decided afresh by providing an opportunity of being heard to the assessee. Since, the penalty sustained u/s 271(1)(c) of the Act is directly related to the addition sustained by the CIT(A) out of the expenses, the said issue has been set aside to the file of the CIT(A). Therefore, the present issue relating to the levy of penalty u/s 271(1)(c) of the Act is also restored to the file of the CIT(A) to be adjudicated after considering the outcome of the appeals on quantum. In the result, the appeals of the assessee are allowed for statistical purposes.