ACIT, Central Circle -18,rd Room no. 327, 3ARA Centre,E-2,Floor,Jhandewalan Extension,New Delhi V/s .M/s HCL Corporation Ltd.,(Formerly known as M/s Slocum Investment Pvt. Ltd.) 806-808,Sidhartha 96, Nehru Place,New Delhi
July, 05th 2012
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI `C' BENCH
BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM
ITA no.1988 /Del/2012
Assessment year: 2005-06
ACIT, Central Circle -18, V/s . M/s HCL Corporation Ltd.,
Room no. 327, 3 Floor, (Formerly known as M/s Slocum
ARA Centre, E-2, Investment Pvt. Ltd.) 806-808,
Jhandewalan Extension, Sidhartha 96, Nehru Place,
New Delhi New Delhi
[PAN : AAACS 0921 R]
Assessee by Ms. Pinky Kapoor,AR
Revenue by Ms. Veena Joshi,DR
Date of hearing 03-07-2012
Date of pronouncement 03-07-2012
A.N.Pahuja:- This appeal filed on 30.04.2012 by the Revenue against an order
dated 14.02.2012 of the ld. CIT(A)-III, New Delhi, raises the following grounds:-
"1 On the facts and circumstances of the case, CIT(A)
has erred in law and on facts in cancelling the penalty
imposed by the Assessing Officer u/s 271(1(c) on
account of disallowance of `2,53,02,920/- u/s 14A of the
Income-tax Act, 1961, read with Rule 8D of the Income-
tax Rules, 1962.
2.On the facts and circumstances of the case, CIT(A) has
erred in law and on facts in cancelling the penalty
imposed by the Assessing Officer u/s 271(1(c) in respect
of disallowance of ``4,69,15,726/- u/s 94(7) of the
Income-tax Act, 1961 on account of short term capital
2 ITA No.1988/Del./2012
3. The order of the CIT(A) is erroneous and is not tenable
on facts and in law.
4. The appellant craves leave to add, alter or amend
any/all of the grounds of appeal before or during the
course of the hearing of the appeal. "
2. Facts, in brief, as per relevant orders are that assessment in this
case was completed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred
to as the Act) on an income of ``10,39,97,795/- vide order dated 4th December,
2007 in pursuance to return declaring income of ``5,45,00,000/- and exempted
income of ``276,75,30,877/- Inter alia, an amount of ``4,69,15,726/-was
disallowed u/s 94(7) of the Act as against disallowance of `2,95,03,308 offered
by the assessee besides disallowance of ``30,26,725/- in terms of provisions of
sec.14A of the Act. Penalty proceedings u/s 271(1)(c) of the Act were also
initiated. On appeal, the ld. CIT(A) upheld the aforesaid disallowances.
Subsequently, in response to a showcause notice before levy of penalty, the
assessee submitted a detailed reply. After considering the reply of the assessee,.
penalty of ``2,64,26,609/- @100% of the tax sought to be evaded on the
aforesaid amount of ``7,22,18,646/- was imposed u/s 271(1)(c) of the Act for
furnishing inaccurate particulars of income..
3. On appeal, the ld. CIT(A) cancelled the penalty, following, inter alia,
the decisions in CIT Vs. Reliance Petro Products Pvt. Ltd.; 322 ITR 158 (SC);
Sunash Investment Co. Va. ACIT (2007) 14 SOT 80 (Mumbai) and Neeraj Kr.
Sahu Vs. DCIT (2007) 13 SOT 1 (Lucknow) as also the decision of the ld. CIT(A)
in the assessee's own case for the AY 2006-07.
4 The Revenue is now in appeal before us against the aforesaid
findings of the ld. CIT(A). At the outset, both the parties are agreed that the
aforesaid two additions, forming the basis of aforesaid penalty, having been set
aside by the ITAT vide their decision dated 9.3.12 in quantum appeal in ITA
3 ITA No.1988/Del./2012
no.2003/Del/2009 to the file of the AO for re-adjudication, penalty does not
survive at this stage.
5. We have heard both the parties and gone through the facts of the
case. We find that the ITAT vide their decision dated 9.3.12 in ITA
no.2003/Del/2009 in quantum appeal restored the aforesaid two issues relating
to disallowance in terms of provisions of sec. 94(7) & sec.14A of the Act to the
file of the AO for re-adjudication,. Since the additions ,forming the basis of levy
of penalty itself have been set aside, penalty imposed u/s 271(1)(c) of the Act
does not survive. Hon'ble Supreme Court in the case of K.C.Builders
Vs. ACIT,265 ITR 562(SC) held that ordinarily, penalty cannot stand
if the assessment itself is set aside. W here 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 High Court in the case
of CIT Vs. R.Dalmia,(1992)107 Taxation 107, held that no penalty
survives after deletion of additions, forming the basis for the levy of
penalty. Similar view was taken in Addl. Commissioner of Income-
tax v. Badri Kashi Prasad (1993] 200 ITR 206 (All) and Prabhat Oil
Traders v. Income-tax Officer (No. 3) (1996) 218 ITR (A.T.) 39
(ITAT, Ahmedabad),City Dry Fish Company v. Commissioner of
Income-tax (1999) 238 ITR 63 (A.P.) , CIT vs. Mohd. Bux Sokat Ali
(2004) 265 ITR 326 (Raj)and ACIT vs. VIP Industries (2009) 122
TTJ 289 (Mum).
5.1 Since the very basis upon which the penalty has been imposed
on the amount of ``7,22,18,646/- added by the AO, does not exist in
view of the aforesaid order dated 9-3-2012 of the ITAT in quantum
appeal , we are of the opinion that penalty levied in relation to the
said amount does not survive at this stage. Accordingly, the
4 ITA No.1988/Del./2012
impugned order is , therefore, set aside to that extent. However, the
AO is free to initiate the penalty proceedings in accordance with law
while completing the assessment in pursuance to the directions of
the ITAT in quantum appeal. W ith these observations, ground nos. 1 &
2 in the appeal are disposed of.
6. Ground no.3 in the appeal ,being general in nature, does not require any
separate adjudication while no additional ground having been raised before us in
terms of residuary ground no.4 in the appeal, accordingly, these grounds are
7. No other plea or argument was made before us.
8. In the result, appeal is dismissed.
Order pronounced in open Court
(RAJPAL YADAV) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
Copy of the Order forwarded to:-
2. ACIT, Central Circle -18, Room no. 327, 3 r d Floor, ARA Centre, E-
2, Jhandewalan Extension, New Delhi
3. CIT concerned.
4. CIT(A)-III, New Delhi
5. DR, ITAT,'C' Bench, New Delhi
6. Guard File.