Revenue's penalty appeal dismissed; fresh assessment ordered by ITAT upheld.

The High Court dismissed the Revenue's appeal against the assessment order. The CIT (Appeals) canceled the penalty imposed by the Assessing Officer, which was based on an assessment set aside for a fresh assessment by the ITAT. The ITAT upheld the cancellation of the penalty and granted liberty to initiate fresh penalty proceedings, contingent on success in appeal before the High Court. However, since the High Court also dismissed the appeal, the present appeal by the department was deemed infructuous and dismissed.

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Issues:
1. Dismissal of appeal by the Revenue against the order of assessment
2. Penalty proceedings under section 271(1)(c) imposed by the Assessing Officer
3. Cancellation of penalty by the CIT (Appeals)
4. Appeal by the Revenue against the CIT (Appeals) order before the ITAT
5. Dismissal of the Revenue's appeal by the ITAT
6. Granting of liberty to initiate fresh penalty proceedings by the ITAT
7. Dismissal of the present appeal by the department

1. Dismissal of appeal by the Revenue against the order of assessment:
The appeal preferred by the Revenue against the order of assessment was dismissed by the High Court. Initially, the assessment order was passed by the assessing authority, which was challenged in appeal before the CIT (Appeals). The CIT (Appeals) partly allowed the appeal, directing to allow depreciation on various assets. The assessee further approached the ITAT, which set aside the order of the authorities and directed the Assessing Officer to make a fresh assessment. The department's appeals under section 260A of the Act were also dismissed by the Division Bench of the High Court.

2. Penalty proceedings under section 271(1)(c) imposed by the Assessing Officer:
The Assessing Officer proceeded with penalty proceedings under section 271(1)(c) based on the additions sustained by the CIT (Appeals). The penalty was imposed, but the CIT (Appeals) cancelled the penalty, stating that there was no justification for its levy since the assessment forming the basis of the penalty order had been set aside by the ITAT for a fresh assessment.

3. Cancellation of penalty by the CIT (Appeals):
The CIT (Appeals) cancelled the penalty imposed by the Assessing Officer, noting that the assessment on which the penalty was based had been set aside by the ITAT for a fresh assessment. The CIT (Appeals) observed that there was no justification for the penalty in such circumstances.

4. Appeal by the Revenue against the CIT (Appeals) order before the ITAT:
Against the order of the CIT (Appeals) cancelling the penalty, the Revenue preferred an appeal before the ITAT. However, the ITAT rejected the appeal, stating that there was no reason to interfere with the CIT (Appeals) order. The ITAT highlighted that the very basis for the penalty, i.e., treating the assessee as a Trust, was not eligible for exemption from income, as the ITAT had directed to treat the assessee as a Trust and make a fresh assessment.

5. Dismissal of the Revenue's appeal by the ITAT:
The ITAT dismissed the Revenue's appeal against the CIT (Appeals) order, emphasizing that the assessment order treating the assessee as a Trust was not eligible for exemption from income. The ITAT upheld the direction to make a fresh assessment in accordance with the law.

6. Granting of liberty to initiate fresh penalty proceedings by the ITAT:
The ITAT, while dismissing the appeal, granted liberty to the department to initiate fresh penalty proceedings under section 271(1)(c) if they succeeded in appeal before the High Court. However, since the High Court dismissed the appeal, the present appeal was deemed infructuous.

7. Dismissal of the present appeal by the department:
Due to the changed circumstances and the dismissal of appeals by the Revenue, the present appeal by the department was also dismissed as having become infructuous. The ITAT had granted liberty to initiate fresh penalty proceedings in case of success in appeal before the High Court, but since the High Court dismissed the appeal, the present appeal was no longer valid.

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