Penalty based on order passed in cursory & summary manner not sustainable

CA Prarthana Jalan 21 Jan 2015 1,869 Views 0 comment Print Income Tax | Judiciary

Case Law Details

Case Name : M/s. Fortune Ploymers Industries Pvt.Ltd. Vs DCIT (ITAT Delhi)

Appeal Number : ITA No. 1036/Del/2013

Date of Judgement/Order : 16/01/2015

Related Assessment Year :

Hon’ble Delhi ITAT has in the case of M/s. Fortune Ploymers Industries Pvt.Ltd. vs. DCIT, has held that Penalty u/s 271(1)(c) cannot be imposed on an un-detailed assessment order passed in a cursory and summary manner .

Facts in brief:- The assessee is a company incorporated in July, 1988. It was engaged in the business of manufacturing of PVC Water Storage Tanks. The manufacturing facility was constituted at Plot no.6B, Site B, Surajpur,Greater Noida, U.P. The company was financed by U.P. Financial Corporation (hereinafter called UPFC) and Pradeshiya Industrial and Investment Corporation of U.P. (hereinafter called PICUP).

2.1. On 28.7.1995, the assessee was taken over by UPFC for failure to clear dues. On 13.12.1996, reference was filed u/s 15(1) of the Sick Industrial Companies Act, for declaring the assessee as a sick company. On 18.3.1997 BIFR declared the assessee as a sick company. Thereafter on 30.11.1997 the assessee filed a return for losses. On 23rd Feb.2000 the Board of Industrial and Financial Reconstruction (BIFR) ordered for winding up. Just before passing the order of winding up the AO passed order u/s 143(3) on 10th Feb.2000 determining the assessed income at ‘nil’. Thereafter penalty was levied u/s 271(1)© on deemed income of Rs. 3,90,43,136/- being loss claimed and disallowed.

The Honble Delhi ITAT observed that

A perusal of the assessment order demonstrates that it has been passed in a cursory and summary manner, de hors of any detail, except for mentioning that certain figures had not tallied, no analysis whatsoever or reasons leading to the disallowance, are given by the AO. AO simply says that the assessee has filed reply explaining the discrepancies but does not give any reason as to why the explanation cannot be accepted. Nowhere in the penalty order the charge on which penalty is being levied has been specified. Such an assessment, in our view cannot be a basis for levy of penalty u/s 271(1)(c).

And finally the Hon’ble ITAT concluded as under

As stated the AO has passed the order in a summary manner, without specifying the grounds of disallowance, item wise. The AO has also not specified the charge on which penalty is being levied. The explanation given by the assessee, during the course of assessment proceedings, explaining the variation between the provisional books and the audited records, were not considered by the AO. Under these facts and circumstances, applying the proposition laid down in the case law referred above, we hold that the penalty levied cannot be sustained. Hence we quash the order levying penalty u/s 271(1)(c) and allow the appeal of the assessee.

ITAT relied on following Judgments :-

New Holland Tractors India (P) Ltd. Vs. CIT (Delhi High Court), ITA 182/2002 judgement dt. 25th September,2014

CIT vs. Manjunatha Cotton and Gining Factory (Karnatak High Court) (2013) 359 ITR 565 (Karn) judgment dated 13th December, 2012.

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