Commissioner of Income Tax -1 vs M/S U.P. State Bridge Corporation Ltd.

Dr. Satish Chandra

This appeal u/s 260-A of the Income Tax Act has been filed against the judgment and order dated 19.04.2007 passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A.No.26/Lko/2007 for the assessment year 1990-91.

This Court vide order dated 18.01.2008 has admitted the appeal on the following substantial questions of law:

Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was right in law in deleting the penalty imposed u/s 271 (1) (c) of the Income Tax Act, 1961 by holding that the imposition of penalty against the addition on account of Exchange, Variation Reserve was not exigible as the issue, as such, was a ''debatable'' one.

Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified i holding the said issue as debatable especially when there was no ambiguity in law on the subject and also when the addition was made by the A.O. only on the basis of the directions of the learned ITAT itself, in the assessee''s own case for the A.Y. 1982-83.

Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified in law in deciding the appeal dealing with penalty u/s 271 (1)(c) by holding the addition as ''debatable'', before deciding the said issue, involved in quantum appeal which itself was pending before the learned ITAT.

The brief facts of the case are that the assessee is a State Public Sector Undertaking, engaged in the business of civil construction work, like bridges, flyovers in India and abroad. For the assessment year under consideration, the assessee filed its return of income on 31.12.1990 declaring a loss of Rs. 1,55,68,934/- against which the assessment was completed by the A.O. at nil income, which was set aside by the CIT(A) and a fresh assessment was completed on the net loss of Rs. 87,81,840/- on 21.03.1996. Against the said assessment year, the assessee filed an appeal before the CIT(A), who passed an order on 20.03.1997 giving part relief to the assessee and computed the income of Rs. 63,04,100/-. Later, the assessment was rectified u/s 154 of the Act on 08.05.2001 on a net loss of Rs. 1,06,85,540/-. The issue was again examined by the CIT-I, Lucknow under the provisions of Section 263 of the Act, where he has observed that the A.O. has not taxed the Exchange Variation Reserve (EVR) amounting to Rs. 2,00,62,003/- appearing on asset side in the balance sheet of the assessee as on 31.03.1990. Finally, on 28.03.2003, the CIT has set aside the assessment u/s 263.

al assessment order was passed on 12.12.2003 determining the total income at Rs. 71,28,266/- which included addition pertaining to EVR. In the meantime, the A.O. initiated penalty proceedings u/s 271 (1)(c) of the Act. After due notice, the A.O. imposed the penalty of Rs. 1,25,00,000/- u/s 271(1)(c) of the Act, the same was cancelled not only by the CIT(A), but also by the Tribunal vide its impugned order. Still not being satisfied, the department has filed the present appeal before this Court.

With this backdrop, we have heard learned counsel for parties and gone through the materials available on record.

There is consensus between the parties that the appeal pertaining to the quantum for the assessment year in question is still pending before the Tribunal. Though proceedings under penalty and quantum appeals are independent as per ratio laid down in the case of Durga Kamal Rice Mills Vs. Commissioner of Income Tax, , but in the instant case, it will be appropriate, if the Tribunal will first decide the quantum appeal and then penalty appeal, specially when in the present case, the penalty imposed is based pertaining to the concealment, for which addition has already been made and the same is a subject matter before the Tribunal in a quantum appeal. Hence issue pertaining to impose penalty is solely depend on quantum appeal. Therefore, at this stage, no answer can be given to the substantial questions of law and the answer to the substantial questions of law will be discussed in an appropriate case.

With the consent of learned counsel for parties, we set aside the impugned order and restore the matter to the Tribunal to decide the issue of penalty afresh in the light of decision taken in the quantum appeal.

In view of above, the appeal filed by the department is disposed of.