2016 (3) TMI 1228

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....nst penalty u/s 271(1)(c) infructuous, despite the fact that ao has already deleted the said addition. 3 That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming penalty u/s 271(1)(c) against addition on account bonus, which was inadvertently claimed because of mistake in Form 3CD. 3. Briefly stated, the facts of the case are that the assessee company submitted its return of income on 2.11.2006 declaring total income at Rs. 4,46,00125/-. The Assessing officer framed the assessment u/s 143(3) of the Act determining assessed income at Rs. 4,76,37,525/-. The Assessing officer initiated penalty proceedings u/s 271(1)(c) of the Act on account of interest capitalization on the capital work in progress amounting to Rs. 71,286/-, capitalization of foreign exchange loss Rs. 6,42,875/- capitalization of upfront free amounting to Rs. 2,82,805/-, disallowance of bonus amounting to Rs. 16,55,846/- and disallowance u/s 14A amounting to Rs. 1 lakh and disallowance and the excess claim of depreciation amounting to Rs. 2,84,588/-. While deciding the quantum appeals of the assessee, the CIT(A) upheld the above additions except the excess claim of ....

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.... The Assessing officer has imposed penalty on this addition also. 7. On appeal, the CIT(A) observed that the Tribunal in ITA No. 1114/Chd/2009, restored the matter to the file of the Assessing officer with a direction to verify the issue and decide the same afresh in accordance with law. It is observed that CIT(A) has not decided this issue as to whether penalty u/s 271(1)(c) of the Act is leviable on the addition of Rs. 2,82,805/-. However, the CIT(A) noted that this ground of appeal has become infructuous. In our considered view, the decision of the CIT(A) on this issue is not correct in law. It is well settled law that where an order of assessment or re-assessment 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. In view of the settled legal position, when the issue was restored to the file of the Assessing officer for a fresh decision, the CIT(A) should have cancelled the penalty u/s 271(1)(c) of the Act on the addition of Rs. 2,82,805/- instead of holding that this ground of appeal has become infructuous. Accord....

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....istake in Form 3CD. The assessee agrees to the disallowance of this deduction subject to no penalty u/s 271(1)(c)." A copy of the aforesaid letter is available at pages 38 to 40 of the assessee's compilation. Shri Sarabjit Garg, Ld. Counsel for the assessee also invited our attention to the copies of the order sheets recorded by the Assessing officer in the assessment records which is available at pages 15 to 20 of the assessee's compilation. According to Ld. Counsel for the assessee on perusal of these order sheets, it would be clear that no query was raised on this issue by the Assessing officer throughout the assessment proceedings. However, on 11.11.2008, in response to the assessee's aforesaid submissions, the Ld. Assessing officer wrote order sheet as under:-- "11/11/20008 - Present Shri Sarabjeet Garg, CA. Filed letter dated 11.11.2008, which is placed in Vol-I. Books of a/c produced by Shri Inderjit Singh Sohi, Finance Controller which were test checked. Addition on account of bonus of Rs. 16,55,146/- is to be made on the amount has been already claimed in assessment year 2005-06 return. Also, depreciation on electric installations is to be made at 10% and not 1....

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.... Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the tax audit report. 19. The contents of the tax audit report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. ....