TMI Blog2010 (12) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration has been reopened u/s 147 of the Act by issue of notice u/s 148 on 25-03-1999. During the re-assessment proceedings, the assessee was confronted with the issue of value of closing stock and after considering the reply, the assessing officer calculated the amount of addition at ₹ 87,08,045 on account of under valuation of closing stock of rapseed refined oil. The assessing officer also initiated penalty proceedings u/s 271(1)(c) of the Act. The assessing officer levied penalty of ₹ 51 lakhs being 100% tax sought to be evaded on the ground that the addition made by the assessing officer on account of valuation of closing stock stood confirmed by the CIT(A). Before the CIT(A) it was contended by the assessee tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. 3. The ld.AR submitted that when the original order has been set aside by the ITAT, the penalty order is also liable to be set aside. He further submitted that there was no quantitative difference. Only difference was on account of valuation of the closing stock and for that difference, penalty u/s 271(1)(c) is not applicable. The ld.A also relied upon the written submissions which have been placed on record. 4. The ld.DR, on the other hand, relied upon the order of CIT(A) and submitted that the ITAT has not set aside the whole assessment order. It sent back the matter to the file of the assessing officer for quantification. Therefore, penalty initiated in original proceedings is in accordance with law. 5. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we are of the view that the Assessing Officer is not justified in taking the market value of finished goods at a higher market rate of the Companies which fetches more value. Moreover, as per the decision of the Hon ble Calcutta High Court in the case of CIT v. Bengal Jute Mills (supra), closing stock of one year is same as opening stock of next year, revaluation of opening stock of next year has to be made on the same basis where revaluation of closing stock of year is made. In view of such proposition, we are of the view that the Assessing Officer has not applied the exact market rate and as per the submission of the assessee, the undervaluation resulted into a higher addition of ₹ 9,92,700. Therefore, we reverse the finding of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at especially when with the absence of the same being spelt out by the order of the assessing authority. The legal position is well settled in view of the Apex Court judgment in the case of CIT vs SV Angidy Chettiar 44 ITR 739 (SC) that power to impose penalty u/s 271 of the Act depends upon the satisfaction of the Income-tax Officer in the course of the proceedings under the Act. It cannot be exercised he is not satisfied and has not recorded his satisfaction about the existence of the condition specified in clauses (a), (b) and (c) before the proceedings are concluded. When the quantum matter is set aside, may be for quantification or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside, the penalties too are liable to be set aside. But if no order in the penalty proceedings has been made before the order of assessment of income in respect of which such proceedings have been initiated is set aside, penalty cannot be levied thereafter. If the order setting aside assessment is subjected to further appeal, there may be justification for keeping the proceedings for imposing penalty pending until the final outcome of the appeal and then to make an order to accord with the taxable income as determined. In such a case the limitation prescribed under section 275 will be with effect from the receipt of such order by the Commissioner. The petitioners-assessees were partners of a firm which was assessed as a registered fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions: Held, allowing the petitions, that as on the date on which the penalty orders were made there were no subsisting assessment orders either against any partner in his individual capacity or against the firm for which, as partners, if so permissible under law, they could be subjected to any penalty. The only ground which weighed with the Assessing Officer to levy penalty was that otherwise he would lose his limitation to impose penalty which according to him might become imposable in case the Supreme court on an appeal upset the decision of the court rendered in the case of the firm. This reasoning was unsustainable and the orders of penalty were liable to be quashed. 6. In the light of above discussion we find that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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