The Commissioner Of Income-Tax (Central), Ludhiana v. Shri Sanjiv Kumar, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH I.T.R.No. 31 of 2002 DATE OF DECISION: FEBRUARY 04, 2008 The Commissioner of Income-tax (Central), Ludhiana .....PETITIONER Versus Shri Sanjiv Kumar, Ludhiana ....RESPONDENT CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present:Mr. Sanjiv Bansal, Advocate,for the revenue. .. SATISH KUMAR MITTAL, J. Pursuant to the directions given by this Court vide orderdated February 26, 2001 passed in ITC No.157 of 1996 filed by therevenue, to draw up a statement of the case and refer the followingsubstantial question of law to this Court, the Income Tax AppellateTribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as `theITAT') has referred the said question for the opinion of this Court:- “Whether, on the facts and in the circumstances of the case,the Income-tax Appellate Tribunal was right in law incancelling the penalties levied u/s 271(1)(a), 273(2)(aa) and271(1)(c) merely holding that since the entire addition madeby the Assessing Officer has been deleted by the Income-taxAppellate Tribunal, there is no case for sustaining thepenalties without appreciating the fact that referenceapplication u/s 256(2) filed against the deletion of addition ispending before the Hon'ble High Court for adjudication?” In the present case, for the Assessment Year 1981-82, the assessee filed its original return of income on 24.08.1981 declaring anincome of Rs.55,574/-. The assessment was completed under Section 143(3) of the Income Tax Act (hereinafter referred to as `the Act') on thedeclared income on 30.9.1983. Subsequently, the case was reopened I.T.R. No. 31 of 2002 -2- under Section 148 of the Act on certain information when it was noticedthat the assessee had understated the purchase price of 810 shares of M/s.Angoora Wool Combers Pvt. Ltd. The Assessing Officer issued notice on 10.5.1985 to theassessee. Pursuant to the return filed by the assessee on 19.2.1986, theAssessing Officer initiated and levied penalty under Section 271(1)(a) forlate submission of return. Penalty under Section 271(1)(c) was levied forconcealment of income and also under Section 273(2)(aa) for default inpayment of advance tax and for filing untrue estimate of the advance tax. The Assessing Officer, after issuing notice under Section 148of the Act, proceeded to make fresh assessment and made an addition ofRs.1,14,502/- on account of under-valuation of the purchase price ofshares. The value of each share was fixed at Rs.149.36. Feeling aggrieved against the aforesaid order, the assesseewent in appeal which was partly allowed by the Commissioner of IncomeTax (Appeals). Against that order, the assessee further filed an appealbefore the ITAT. The ITAT vide order dated 5.6.1990 deleted the entireaddition while relying upon its earlier decision dated 4.4.1990 passed inITA No.175 of 1986 in the case of Shri Dharam Pal and it was held thatthe issue involved regarding the price of the share was squarely coveredby the said decision. In view of the said order, the assessee went in appealagainst the levy of aforesaid three penalties with the plea that when theentire addition stands deleted , there was no case whatsoever for levy ofpenalty under any of the three different provisions of the Act. TheCommissioner of Income Tax (Appeals) allowed the appeal and deletedall the penalties. The revenue filed an appeal against the said order. The I.T.R.No. 31 of 2002 -3- same was also dismissed by the ITAT while holding that after the entireaddition was deleted, there was no case for sustaining the penalty underany of the three provisions of the Act. It has further held that since thevery basis had disappeared, the levy of penalty was cancelled. During the course of arguments, it has not been disputed thatthe addition made by the Assessing Officer on account of price of theshare was deleted by the ITAT and that order has become final. I.T.R.No. 31 of 2002 -3- same was also dismissed by the ITAT while holding that after the entireaddition was deleted, there was no case for sustaining the penalty underany of the three provisions of the Act. It has further held that since thevery basis had disappeared, the levy of penalty was cancelled. During the course of arguments, it has not been disputed thatthe addition made by the Assessing Officer on account of price of theshare was deleted by the ITAT and that order has become final. After hearing the counsel for the revenue and going throughthe reference as well as the finding recorded by the ITAT pertaining to thedeletion of the addition made by the Assessing Officer as also the orderdeleting the penalty, we are of the opinion that once the entire additionhas been deleted, then there remains no case for penalty whatsoever. Thevery basis of issuance of notice had disappeared. Once the addition wasdeleted, there was no requirement for the assessee to file the returnshowing higher income. Admittedly, present case is not a case ofconcealment of income nor the revenue has been able to establish suchfact. Therefore, in our opinion, the ITAT has rightly come to theconclusion that after the entire addition was deleted, there was no case forsustaining the penalty under any of the three provisions of the Act.Accordingly, the reference is answered against the revenue and in favourof the assessee. Disposed of accordingly. (SATISH KUMAR MITTAL) JUDGEJUDGE February 04, 2008vkg (RAKESH KUMAR GARG) JUDGE