TMI Blog2012 (7) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and any mention of initiation of penalty in the appellate order making enhancement in book profit, penalty is not leviable. No penalty is justified in respect of enhancement of book profit. - ITA No.3424/Ahd/2010, ITA No.3425/Ahd/2010, ITA No.3426/Ahd/2010 - - - Dated:- 25-10-2011 - T K Sharma, A K Garodia, JJ. For Appellant: Shri Vinod Tanwani For Respondent: Shri Tushar Hemani ORDER Per: A K Garodia: All these four appeals are filed by the Revenue against separate orders of the learned Commissioner of Income-tax (Appeals)-I, Ahmedabad dated 18.10.2010 in four different but connected cases for A.Y.2003-2004 in the case of Gujarat Ambuja Exports Ltd., A.Y. 1995-1996 in the case of Smt.Sulochana Gupta and in the case of Shri Vijaykumar D. Gupta for A.Y.1995-96 and 1997-98. Since issue raised in all these appeals is common, for the sake of convenience, these appeals were heard together and are being disposed of by this common order. 2. In all these appeals, the only common grievance raised by the Revenue is regarding deletion of penalty under Section 271(1)(c) of the Income Tax Act imposed by the AO. Hence, we reproduce the ground of appeal as raised i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.28,60,274/-. In the meantime, the AO initiated penalty proceedings and in the penalty order passed on 29.5.2009, he imposed the penalty of Rs.14,98,310/- in respect of two additions i.e. Rs.28,60,274 on account of disallowance of interest claimed on funds advanced to GACL and profit on sale of shares of Rs.9,48,000/- totaling to Rs.38,08,274/-. Against this penalty order, the assessee preferred appeal before the learned CIT(A) who deleted the penalty as per the impugned order against which now the Revenue is in appeal before us. 5. In the third case, i.e. in the case of Shri Vijaykumar D. Gupta for A.Y.1995-96, the return of income was filed by the assessee disclosing total income at Rs.8,39,600/-. In that case, the assessment was completed by the AO under Section 143(3) as per the assessment order dated 30-3-1998 at Rs.1,72,11,640/- and for doing so, he made disallowance of interest claimed by the assessee on funds advanced to GACL of Rs.28,60,274/- and he also made disallowance of interest claim for investment in shares of GACL in the name of Pooja Freight and Carriers Ltd., amounting to Rs.42,90,411/- and also made disallowance of interest on funds borrowed for inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, it is submitted by the learned counsel for the assessee that in the present case, in the quantum proceedings, the Tribunal has followed its decision in quantum proceedings in the case of DCIT Vs. M/s.Pramukh Oxygen Pvt. Ltd., ITA No.3939/Ahd/2002 and 1936/Ahd/2001 for A.Y.1996-97 to 1998-99 and disallowance of interest in the present case is confirmed. It was submitted by him that it showed that the facts in the present case and in the case of Pramukh Oxygen Pvt. Ltd. (supra) are identical. He further submitted that in the case of Pramukh Oxygen Pvt. Ltd. also, penalty was imposed by the AO under Section 271(1)(c) and in that case, the penalty was deleted by the learned CIT(A) and the matter was carried to the Tribunal by the Revenue. He submitted copy of the Tribunal order in the case of Pramukh Oxygen Pvt. Ltd. (supra) for A.Y.1996-97 to 1998-99 in ITA No.594 to 596/Ahd/2007 dated 20.11.2007. He submitted that the said company later on was amalgamated with M/s.Aim Industries Ltd., and therefore, the order of the Tribunal, in that case is in the name of Aims Industries Ltd. It is stated in the order of the Tribunal that this company was formerly known as M/s.Pramukh Oxygen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the learned CIT(A) has also followed the judgment rendered in the case of CIT Vs. Lakhdir Lalji, 85 ITR 77 (Guj) . 9. Regarding disallowance under Section 35D, exemption under Section 10B and rejection of claim of deduction under section 80HHC, it is held by the learned CIT(A) that complete disclosure was made by the assessee and therefore, no case was made out regarding concealment of income or furnishing of inaccurate particulars of income. 10. We have considered rival submissions and perused the record and also gone through the orders of the authorities below and the judgments cited by the learned counsel for the assessee. In two individual cases viz. Smt. Sulochna Gupta for A.Y.1995-96 and Shri Vijaykumar D. Gupta for A.Y.1995-96 and A.Y.1997-98, the penalty was levied by the AO on account of disallowance of interest. In quantum proceedings, such disallowance of interest was deleted by the learned CIT(A) in both the cases. But the Tribunal reversed the order of the learned CIT(A) in quantum proceedings and restored the assessment order regarding the disallowance of interest by following the Tribunal decision in the case of M/s.Pramukh Oxygen Pvt. Ltd (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) vide para 8 to 8.2 of the impugned order, which is reproduced below: 8. I have considered the submission of the appellant, facts of the case and gone through the case laws relied by the Ld. AR. In the present penalty order under appeal, the penalty has been levied on the enhancement made to the book profit, the enhancement has been made by CIT(A)-VIII, Ahmedabad in the appellate order against order u/s. 143(3) of the Act. However, I find that in the appellate order, no penalty proceeding has been initiated on the enhancement of book profit. The law is well settled that the authority, which is adding the income has to record a satisfaction to the effect that penalty is required to be levied. In absence of such satisfaction and any mention of initiation of penalty in the appellate order making enhancement in book profit, penalty is not leviable This view is directly supported by the decision of the jurisdictional high courts in the case of Lakhdhir Lalji, 185 ITR 77 (Guj), wherein, it was held that when the very basis of quantum addition undergoes a change, the initiation of penalty made against the old basis of quantum addition is not good enough for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te particulars of income, therefore, the penalty levied u/s. 271(1)(c) on account of disallowance u/s. 35D, reduction in exemption u/s. 10B and rejection of claim u/s.80HHC is directed to be cancelled. 12. In the above paras of the order of the learned CIT(A), we find that the first observation of the learned CIT(A) was that there was enhancement made by the learned CIT(A) in the quantum proceedings regarding book profit, but no penalty proceedings had been initiated on the enhancement of the book profit. He also stated that law is well settled that the authority, which is adding the income has to record a satisfaction to the effect that the penalty is required to be levied. In the absence of such satisfaction and any mention of initiation of penalty in the appellate order making enhancement in book profit, penalty is not leviable. In the penalty order of the Company, we find that the AO has levied penalty of Rs.69,13,790/- being 7.5% of the tax along with surcharge on book profit which was enhanced by the learned CIT(A) by Rs.8,77,94,182/-. In view of this finding of the learned CIT(A) in para-8 of his order, which could not be controverted by the learned DR of the Revenue, we ..... 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