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Income Tax - Case Laws
Showing 1 to 20 of 385 Records
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2011 (8) TMI 1377
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... ... ..... spectfully following the Hon ble Kolkata Tribunal order for A.Y. 2005-06 (ITA No.552(Kol) of 2008) and my order for A.Y. 2005-06 and 2006-07 in the appellant s own case, I direct the A.O. to allow the claim of the appellant treating the gains from share transactions as LTCG instead of business income. In my earlier order for A.Y. 2006-07 I have also allowed the claim of the appellant in respect of STCG. Following my own order on identical issue and facts, I direct the A.O. to allow the appellant s claim in respect of both LTCG and STCG. The appellant s ground is allowed. We find that the lower authorities have reached a concurrent finding that facts and circumstances are exactly identical, taking the situation as it is, as the revenue now before us could not point out any difference in the facts, we are taking this as covered issue in favour of the assessee. Revenue s appeal is dismissed. 4. In the result, appeal of the revenue is dismissed. 5. Order pronounced in open court.
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2011 (8) TMI 1376
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... ... ..... d. Commissioner of Income Tax (Appeals) has accepted that usage for personal purpose cannot be ruled out. It was contended that this usage is very less and the disallowance on this account is excessive. Ld. Commissioner of Income Tax (Appeals) has upheld the action of the Assessing Officer on this account by observing that element of personal use has been accepted by the assessee itself. 10. Against the above order the assessee is in appeal before us. 11. We have heard both the counsel and perused the records. We find that authorities below have made an estimate disallowance in this regard for personal usage. Assessee has also accepted that personal usage cannot be ruled out. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) on this issue and hence, we uphold the same. 12. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 05/8//2011.
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2011 (8) TMI 1372
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... ... ..... ng equivalent obligation in the form of continuing to provide use of the capital structure for efficient discharge of effluent emitted by memberindustries. Even accounting standard -9 provides such deferring of revenue for taxation. Accounting Standard 9 has been referred above and para 6 thereof is relevant. 13. Following the above decision of Special Bench in the case of ACIT vs. Mahindra Holidays Resorts (India) Ltd. (supra) we hold that the assessee was justified in deferring the revenue for taxation for four years. Accordingly, this ground of assessee is allowed. Since the issue under consideration is identical, the above finding of the ITAT for A.Y.2001-02 would be squarely applicable to the under consideration. We therefore respectfully following the above order of the ITAT, allow Ground No.1 of the assessee s appeal and delete the addition made by the AO in this regard. 5. In the result, assessee s appeal is allowed. Order pronounced in Open Court on 12th August, 2011
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2011 (8) TMI 1370
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... ... ..... oks of accounts from DGIT Exemption and verify the facts of the case whether income was applied by the assessee trust for the objects of the trust. We, therefore, set aside both the appeals to the file of the assessing officer with the directions that he will obtain the books of accounts from the DGIT Exemption and verify whether the expenses incurred by the assessee were utilized for the purpose of the trust and all other conditions relating to allowability of deduction under section 11 were satisfied or not. The ld. AR of the assessee had given undertaken that the assessee will co-operate with the assessing officer in getting the assessment expeditiously. The assessing officer is directed to pass order on merits after providing sufficient opportunity being heard to the assessee to explain its case. We order accordingly. 5. In the result, both the appeals filed by the assessee are allowed, for statistical purposes. The order pronounced in the open court on 05th August, 2011.
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2011 (8) TMI 1368
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... ... ..... rchased by the assessee was not a commercial vehicle and, therefore, 50% depreciation could not be allowed to the assessee. 8. As per note3A, forming part of AppendixI, the expression "commercial vehicle" in the aforesaid rule means and includes the light motor vehicle. The expression "light motor vehicle" is further defined to mean a motor car, the unladen weight of which, does not exceed 7,500 kilograms. In the present case, it is not in dispute that the assessee fulfills all the conditions laid down in rule III(2)(iid) of AppendixI and even the unladen weight of the light motor vehicle purchased by the assessee does not exceed 7,500 kgs. In these circumstances, the finding recorded by the I.T.A.T. that the assessee is entitled to depreciation @ 50% on the BMW motor car as per rule III(2)(iid) of AppendixI of the Income Tax Rules, 1962 cannot be faulted. 9. In the result, we see no merit in the appeal. Appeal is, therefore, dismissed.
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2011 (8) TMI 1367
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... ... ..... ication as income under the head of business and profession but would fall for classification as income from other sources. Undoubtedly as counsel appearing on behalf of the assessee submits, in determining under which head income would fall, the court must be guided by the principle laid down by the Supreme Court in Nalinikant Ambalal Mody vs. S.A.L. Narayan Row, CIT 1966 61 ITR 428. The Supreme Court held that “whether an income falls under one head or another has to be decided according to the common notions of practical men, for the act does not provide any guidance in the matter”. The interest which accrued to the assessee on the deposits held in the EEFC account cannot be treated as business income.” 6. Respectfully following the decision of Hon’ble High Court (supra), we decide the issue against the assessee and in favour of the Revenue. 7. In the result, the appeal of the assessee is dismissed. Order pronounced on this 24th day of August, 2011.
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2011 (8) TMI 1365
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... ... ..... re, the order of the CIT (A) has to be reversed on this issue. It is clear that the ‘initial assessment year’ for the above purposes was the first year in which the assessee claimed the deduction u/s 80IA(1) after exercising his option as per the provisions of s.80IA(2) of the Act. Consequently, the assessee is entitled to claim the deduction of Rs.25,44,326 u/s 80IA in respect of the profits from the windmill activity. Accordingly, the clarificatory ground raised is allowed. In the result, adjudication of the grounds 3 and 4 raised in the appeal is mere academic and hence they are dismissed as infructuous.” 4. Considering the above, we are of the opinion that the order of the CIT(A) has to be reversed. It is also to be noted that the above ratio is upheld by the High Court of Chennai in the case of 231 ITR 368. Accordingly, the appeal of the assessee is allowed. 5. In the result, appeal of the assessee is allowed. Order pronounced in the court on 26-8-2011.
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2011 (8) TMI 1364
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... ... ..... d by these Rules. By not granting the credit of TDS to the assessee, rr. 37BA(1), (3)(i) and (4) were flouted. The learned CIT(A) correctly rectified this position also. 39. The Department has not been able to show as to why, in this scenario the assessee was required to file any revised return of income. There was no excess TDS to be claimed. It was due to sheer unintended inadvertence that the total TDS of Rs. 31,47,636 did not get shown in the return, though as per the TDS certificates filed along with the return, the total TDS undisputedly was of Rs. 31,47,636. 31. In view of the above discussion, we hold that the CIT(A) has rightly directed the AO to allow credit of TDS of Rs. 31,47,636 to the assessee and to grant consequential refund. Thus, finding no error whatsoever in the impugned order, the same is hereby confirmed. The grievance of the Department is found to be sans substratum. It is, hence, rejected. In the result, the appeal filed by the Department is dismissed.
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2011 (8) TMI 1362
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... ... ..... ties finding the grounds of appeal of the Assessee devoid of merits. 11. Now coming to the other issue of disallowance of ₹ 11,19,048 being expenses under the head Garden, Park, Lake and Vegetable, undisputedly the Assessee has incurred this amount for maintaining the garden, park, lake and garden expenses and growing vegetables directly. The facts made out by the Departmental Authorities are that the sale proceeds of vegetable grown was not brought to account by the Assessee. Therefore, the Departmental Authorities have disallowed the same, which in our view rightly. Hence, we are of the considered view that the action taken by the Departmental Authorities is not at all unjustified on the facts and circumstances of the case. 12. For the reasons discussed above, we uphold the order of the learned CIT(A) and dismiss the appeal of the Assessee having found the issues raised by the Assessee to be devoid of merits. 13. In the result, the appeal of the Assessee is dismissed.
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2011 (8) TMI 1360
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... ... ..... with commercial prudence and nothing is on record indicating that the loss was claimed to be bogus. Even otherwise, the businessman is the best judge in his interest under the peculiar facts and circumstances, therefore, there is nothing on record except probabilities, surmises and conjectures, that too, without any cogent material on record especially when the accounts are audited, transactions are properly recorded, sales are verified, purchases are not doubted, therefore, in view of the decision in ITO vs. Madanlal Singhal & Sons (100 ITJ 647) (Jod), the transaction of purchase and sales, under the facts and circumstances cannot be treated as bogus, therefore, this appeal of the assessee is allowed. Since we have allowed the appeal of the assessee, therefore, we do not feel it appropriate to go into non-admission of addl. evidence under rule 46A filed before the ld. CIT(A). Finally, the appeal of the assessee is allowed. Order pronounced in the open Court on 18.8.2011.
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2011 (8) TMI 1359
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... ... ..... lls P. Ltd, 293 ITR 201, inter alia. This fact was not or could not be denied by the ld.DR as we are also aware of this line of action being taken by the Benches in Chennai. Consequently, we restore this appeal of the Revenue to the file of the Assessing Officer with a direction that he shall decide the impugned issue in the light of plethora of judicial pronouncements on this issue. Needless to mention that the Assessing Officer shall give opportunity of hearing to the assessee as required by law. 4. The cross objection by the assessee would become premature in view of the fact that we have set aside the finding of the ld. CIT(A) and that of Assessing Officer, but the assessee is at liberty to raise this issue whenever occasion arises. Accordingly, we keep open the issues raised in the cross objection but dismiss the same as premature. 5. In the result appeal of the Revenue and cross objection of the assessee stand dismissed. Order pronounced in the open court on 30-08-2011.
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2011 (8) TMI 1358
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... ... ..... Since, in this case, neither the appellant nor the amalgamating companies are carrying on any manufacturing activity, the set off of losses of the amalgamating companies cannot be allowed. The Assessing Officer’s decision is upheld and the appellant gets no relief on this ground also.” 29. Now the assessee has preferred an appeal before us but during the course of hearing nothing has been placed before us to substantiate that the amalgamating companies are industrial undertakings. We however, carefully examined the order of the CIT(A) and we find that under the given facts and circumstances of the case, the CIT(A) has rightly adjudicated the issue and we find no infirmity therein and we accordingly confirm his order. 30. In the result, the appeal nos.153 & 154 of 2009 and 397 of 2010 of the assessee are allowed for statistical purposes and appeal no.60 of 2011 of the assessee is partly allowed for statistical purposes. Pronounced in the open Court on 11.8.2011
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2011 (8) TMI 1353
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... ... ..... ependent material. He has simply extracted the order of DIT(E). Therefore, the reopening of assessment is not sustainable. We allow this ground of appeal in all the four assessment years and quash the reassessment orders. 2.7 As far as the additions on merit are concerned, those additions have been made because benefit of section 12A was not available to the assessee. Now, the Tribunal has restored the registration granted u/s 12A. If, on further appeal, reopening of the assessments are to be held proper then also these issues in our understanding would be decided afresh in the light of the registration available to the assessee u/s 12A. Therefore, we do not see any reason to embark upon the justification of the additions or otherwise. These grounds in a way become redundant, in view of our finding on the issue of reopening of assessment. 3. In view of the above discussion, all the appeals of the assessee are allowed. This order was pronounced in the open court on 26.08.2011.
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2011 (8) TMI 1352
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... ... ..... in the case of Kerala Chemicals and Proteins Ltd supra has held that interest u/s 234D should be charged w.e.f 1.6.2003 whereas the Hon'ble Delhi High Court has held that interest u/s 234D was chargeable from Assessment Year 2004-05 and not in earlier Assessment Years. The Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd 1973 88 ITR 192 SC has held that when there are two views of two different High Courts on an issue, and there is no decision of the Hon'ble Jurisdictional High Court, then the view which favours the assessee must be adopted. Therefore, following the decision of the Hon'ble Supreme Court we hold that interest u/s 234D is chargeable from Assessment Year 2004-05 and subsequent years and not in the earlier years and accordingly dismiss this ground of appeal of the Revenue. 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court after conclusion of hearing on the Eleventh Day of August, 2011.
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2011 (8) TMI 1351
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... ... ..... A.Y. 2002-03 and ₹ .8,41,863 for A.Y. 2004-05 on account of interest received from bank, treating interest received from Co-operative Banks are exempt u/s. 80P(2)(c) of the I.T.Act, 1961 without appreciating the fact that the assessee has not filed any details.” 12. Having heard the learned Departmental Representative, we find from the details of investments of the assessee, all the interest income is from co-operative bank and not from non-cooperative bank. Therefore, they are exempt under section 80P(2)(c). In the impugned order, the CIT(A) has directed the AO to verify whether the contention of the assessee is correct that all the fixed deposits in the cooperative bank and allow the deduction under section 80P(2)(c). Therefore, we do not find any infirmity in his order to interfere and, accordingly, uphold the same. 13. Ground No.4 in both the years is dismissed. 14. In the result, all the appeals are dismissed. Pronounced in the open court on 26th August, 2011
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2011 (8) TMI 1348
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... ... ..... h was required to be examined which had not been done by AO. It is possible that ultimately the discrepancy may be reconciled but fact remains that the AO did not make any examination or enquiry in relation thereto and such order is therefore erroneous and prejudicial to the interest of the revenue. 4.9 Finally, we may point out here that CIT has not decided the issues on merit. He has only restored this issue to the file of AO for passing a fresh order in accordance with law after necessary examination. Therefore, merit is not the issue before us. We are only concerned with the jurisdiction of CIT under section 263. In our view as we have held earlier the order of AO was erroneous and prejudicial to the interest of revenue. Therefore, we hold that exercise of jurisdiction by CIT under section 263 of the Act is legally in order and accordingly the order of the CIT is upheld. 5. In the result appeal of the assessee is dismissed. Order pronounced in the open court on 30.8.2011.
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2011 (8) TMI 1346
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... ... ..... the Jet Speed Ltd and paid on their behalf and the Assessee is receiving only commission at 10% on that amount and he is also claiming to set off this expenditure out of the undisclosed income. We find no force in the arguments of the Assessee's counsel with regard to payment of this amount on behalf of other parties. However, we accede to the other propositions of the Assessee regarding telescoping of this payment out of the undisclosed income. Accordingly, we direct the assessing officer to telescope this payment out of the undisclosed income in the relevant period if any. If there is no undisclosed income during the relevant period covering the block period, he is at liberty to consider the balance payment as undisclosed income of the Assessee. The issue is set aside to the file of assessing officer for fresh consideration. 26. In the result, all the appeals of the Assessee's are partly allowed for statistical purposes. Order pronounced in the open Court 11.8.2011
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2011 (8) TMI 1345
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... ... ..... AAC are vide enough to be co-terminous with those of the A.O., so that he can do and direct the A.O. to do what he has failed to do so. In view of the matter, we are of the view that the assessee is entitled to claim the legal deduction supported by the audit report. Since the above legal claim was not examined by the Assessing Officer nor by the Learned CIT(A), therefore, we are of the view that in the interest of justice the matter should go back to the file of the Assessing Officer and accordingly we set aside the order passed by the Revenue Authorities on this account and send back the matter to the file of the AO to decide the same afresh and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the revenue is, therefore, partly allowed for statistical purposes. 31. In the result, the Revenue’s appeal stands partly allowed for statistical purposes. Order pronounced in the open court on this 5th day of Aug, 2011.
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2011 (8) TMI 1343
Corporate Membership fee CSR Expenditure Deduction u/s 37(1) - Membership fee was not allowed as deduction by AO - HELD THAT:- Following the decision in the case of, OTIS ELEVATOR COMPANY (INDIA) LIMITED VERSUS COMMISSIONER OF INCOME-TAX [1991 (4) TMI 53 - BOMBAY HIGH COURT], we are of the opinion that membership in clubs are taken with the expectation that it would enable the officers of assessee to meet persons in high social status which would result to the growth of the business of the assessee. The expenditure can be said to have been incurred is wholly and exclusively for the purpose of his profession and hence allowable u/s 37(1) - Decision in favour of Assessee.
Undervaluation of closing stock - The AO made an addition to closing stock on the ground that the method followed by the assessee is not as per accounting principles and that date wise details of purchases and consumption of stock have not been furnished - HELD THAT:- . As per the provisions of sec 145A, the value of purchase tax has to be taken into account while valuing the closing stock, but at the same time, as held by the jurisdictional, High Court In the case of COMMISSIONER OF INCOME-TAX VERSUS MAHALAXMI GLASS WORKS P. LTD. [2009 (4) TMI 182 - BOMBAY HIGH COURT], the opening stock valuation should be correspondingly adjusted. Therefore, we restore the matter back to AO to reconsider the facts as per the decision of HC - Matter restored back.
Uninterrupted Power Supply system - Part of Computer System or not? - Ld. CIT(A) said that uninterrupted Power Supply system cannot be considered as part of the computer system and concluded they are not entitled to the rate of depreciation applicable to computer - HELD THAT:- No doubt the UPS can be used for other purposes, in the present case they constitute an essential part of the computer system. The UPS is necessary for the computers to function smoothly and without interruption.
The Delhi Tribunal in the case of DEPUTY COMMISSIONER OF INCOME-TAX VERSUS ORIENT CERAMICS AND INDUSTRIES LTD. [2010 (2) TMI 984 - ITAT DELHI], has held that UPS is an integral part of the computer and hence is entitled to the rate of depreciation applicable to computers. In following the ratio of the decision of the Delhi Tribunal we uphold the claim of the assessee on this issue - Decision in favour of Assessee.
Depreciation on Plant and Machinery - CIT(A) restricted depreciation to half the year stating that assessee has appended certificates from the Plant Managers, but he should have produced further material in the nature of evidence of production for allowance of depreciation for the full year - HELD THAT:- we are inclined to accept the submissions of the assessee that the Machinery in question were put to use prior to 30.9.2003. The certificates of installation issued by Plant Manager Cannot be ignored. The invoice for purchase were much prior to 30.9.2003 and it appears that only the capitalization entry was passed on 30.9.03. We uphold the claim of the assessee, for depreciation on the assets at the full rate.
Computation of Book Profit u/s 115JB - CIT confirmed the taxation of profit on sale of undertaking and profit on sale of fixed assets while computing book profits u/s. 115JB -HELD THAT:- We find that the decision in the case of RAIN COMMODITIES LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), HYDERABAD [2010 (7) TMI 794 - ITAT HYDERABAD] is against the assessee, whatever amount that have been credited to the Profit and Loss account will have to be taken into account in determining the Book profits u/s 115JB and only adjustments permitted are as per Explanation to the section 115 JB - Decision against Assessee.
Diminution in Investments - Provision for loans and Advances - Computation of book profit u/s 115JB - CIT confirmed the taxation of provision for diminution in investments and provision for loans and advances written book while computing book profit u/s 115JB- HELD THAT;- We find that the Ld. CIT(A) has not considered the provision of Explanation (i) to Sec 115 JB. Under that explanation any amount withdrawn from a reserve or provision has to be excluded in computing the Book Profits u/s 115JB. The amount withdrawn can be excluded only if in the year in which Reserve was created or provision made the book profits were increased by the amount of Reserves/ Provisions. However, in this case the provisions were created in the earlier financial year 2002-03. - Matter restored back to AO.
Levy of interest u/s 234B - CIT confirmed the levy of interest u/s 234B when the liability of the appellant arose only u/s 115JB(MAT) - HELD THAT:- Following the decision of JTC. IT., MUMBAI VERSUS M/S ROLTA INDIA LTD. [2011 (1) TMI 5 - SUPREME COURT], where it was held that, the pre-requisite condition for applicability of section 234B is that the assessee is liable to pay tax u/s 208 and the expression "assessed tax" is defined to mean the tax on the total income determined under section 143(1) or under section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of section 115J / 115JA in the levy of interest under section 234B - Decision against assessee.
Payment to Scientific institutions as Business Expenditure - AO allowed payments made to various scientific institutes as a business expenditure by admitting additional evidence in violation of Rule 46A - HELD THAT:- The issue is remitted back to the Assessing Officer for verification of the additional evidence filed by the assessee before the Ld. CIT(A) and if found in order allow the claim of the assessee.
Expenditure incurred in installation -CIT held that fees paid to agency which installed and implemented SAP software to be part and parcel of the acquisition of software itself and thereby allowing 60% depreciation on the same - HELD THAT:- Expenditure incurred in installation/commissioning an asset should be considered as part of cost of acquisition of asset and depreciation allowed thereon. The Ld. CIT(A) had correctly allowed depreciation at 60% on the expenditure on installation treating it as part of cost of acquisition of software.
Business Disallowance u/s 40A(9) - CIT deleted the disallowance of some amount considering them as Staff and sports welfare expenses - HELD THAT:- Following the decision of High Court in the case of COMMISSIONER OF INCOME TAX. VERSUS BHARAT PETROLEUM CORPORATION LTD. [2001 (3) TMI 20 - BOMBAY HIGH COURT], where it was held that such expenditure can't be covered under Section 40A(9), revenue ground was dismissed.
Utilization of CENVAT Credit - CIT deleted the addition made to the total income of the assessee on account of CENVAT credit was obtained during the amalgamation. This CENVAT credit balance was treated as an opening CENVAT credit balance in the books of the assessee post merger - HELD THAT:- As held by CIT(A), as a result of grossing up u/s. 145A, there is an increase in the closing stock for A.Y. 2003-04 - This increase in closing stock has resulted in increase in the opening stock for the current A.Y. which has been brought out by the Tax Auditor. The increase in opening stock consequent to increase in closing stock in the previous year does not result in any reduction in the income. The Auditor has also clarified in the Tax Audit report that consequent to the application of Sec. 145A there is no impact on the profit before taxation. We confirm the finding of the Ld. CIT(A) that the utilization of CENVAT credit is completely revenue neutral and does not call for addition to the profit and loss account - Revenue Appeal Dismissed.
Contribution Towards the Brand Equity and Business Promotion Scheme - AO stated that the company has made huge business losses and since there is no profit before tax the brand equity payment was disallowed by him - HELD THAT:- We find that the issue is covered by the decision in the case of HARRISONS MALAYALAM LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), ERNAKULAM [2007 (5) TMI 372 - ITAT COCHIN], where such expenditure was allowed u/s 37(i) - Respectfully following the ratio of the decision in the case of Harrisons Malayalam (supra) we dismiss the revenue’s appeal.
Disallowance for Brokerage Paid -The assessee submitted that the AO has disallowed certain payments made as brokerage by relying on conjectures and surmises which are unjustified in fact and in law - HELD THAT:- The Ld. CIT(A) observed that the debit notes raised indicates the nature of work done. He further observed that the rate of brokerage charged is reasonable and the market reality is such that loans and borrowing cannot be obtained without brokerage expenses.
We find that the Ld. CIT(A) was correct in holding that the payments have been made for services rendered to the assessee and due to commercial expediency hence allowable as a deduction in the hands of the assessee. This ground of the Revenue is dismissed.
Bad Debts written off when not proved as actually bad - Revenue raised that CIT(A) has erred in deleting the Bad debts when the assessee has not proved them to be actually bad - HELD THAT:- We find that the issue is covered by the decision of Hon’ble Supreme Court in the case of TRF. LTD. VERSUS COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT], wherein it has been held that, this position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In the instant case there is no controversy about the write off, therefore we respectfully follow the decision of SC.
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2011 (8) TMI 1341
Penalty u/s 271(1)(c) - Excess stock of gold ornaments and silver ornaments was found in business premises of Assessee - AO imposed penalty u/s 271(1)(c) on the amount comprising disallowance of remuneration to partners on account of treatment of the amount disclosed on account of excess stock u/s 69B of the Act and the amount added u/s 68.
HELD THAT:- In the assessee's own case, CHOKSHI HIRALAL MAGANLAL VERSUS DY. CIT [2011 (1) TMI 125 - ITAT, AHMEDABAD], tribunal have accepted the claim of the assessee that excess stock has to be treated as business income, entitled to deduction of a higher amount of remuneration to partners in terms of provisions of section 40(b) of the Act. As regards the amount added u/s 68, the matter has been restored to the file of the AO for fresh decision in accordance with law.
Hon'ble Supreme Court in the case of, KC BUILDERS AND ANOTHER VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [2004 (1) TMI 7 - SUPREME COURT], held that ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee, has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled.
Hon'ble Delhi HC, in the case of R DALMIA AND OTHERS (A. OP) VERSUS COMMISSIONER OF INCOME-TAX [1991 (10) TMI 35 - DELHI HIGH COURT], held that no penalty survives after deletion of additions, forming the basis for the levy of penalty.
Since the very basis upon which the penalty has been imposed on the amount relating to excess stock added u/s 69B and consequently, denial of deduction on account of remuneration to partners in terms of provisions of section 40(b) of the Act, does not exist in view of the aforesaid order, we are of the opinion that penalty levied in relation to the said amount has to be cancelled. As regards penalty levied in relation to amount added u/s 68, since matter is restored to the file of the AO, penalty does not survive at this stage. However, the AO is free to initiate the penalty proceedings in accordance with law while completing the assessment in pursuance to the aforesaid directions of the ITAT in quantum appeal - Matter restored back.
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