Law:

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Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment years 1959-60 and 1961-62 - Whether where orders of reassessment, on basis of which penalties under section 271(1)(c) were levied on assessee, had been set aside by Tribunal, no order of penalty could stand by itself - Held, yes FACTS The ITO initiated proceedings under section 147(a) on the ground that the assessee's income chargeable to tax had escaped assessment. He also initiated proceedings for imposing penalty on the assessee and since the penalty imposable exceeded Rs. 1,000, he referred the matter to IAC. The IAC imposed the penalties under section 271(1)(c). In quantum appeals, the Tribunal found on the facts that the reasons for which the ITO had reopened the assessments were not adequate and did not satisfy the requirements of section 147. It accordingly set aside the orders of reassessment without going into the merits of the matter. Against the orders of the IAC imposing penalties, the Tribunal found that as the reassessments for the said two assessments years made under section 147 on the basis of which penalties had been levied had been annulled, the penalties could not be stand. On reference: HELD The orders of reassessment on the basis of which penalties were levied on the assessee had been set aside by the Tribunal. Therefore, the order of penalty could not stand by itself. In spite of opportunities given to the revenue, it had not been informed whether against the order of the Tribunal setting aside the orders of reassessment, any further proceedings had been initiated by the revenue. In the absence of any such information, it was to be presumed that the orders of reassessment stood annulled finally. The Tribunal was, therefore, justified in cancelling the penalties imposed under section 271(1)(c). Note : The case was decided in favour of the assessee. H.M. Dhar and Sunil Mukharji for the Applicant. A. Roy Chowdhry for the Amicus curiae. JUDGMENT Dipak Kumar Sen, J.-Bhagwan Ltd., the assessee, was assessed to income-tax for the assessment years 1959-60 and 1961-62, the relevant accounting years being the calendar years 1958 and 1960. The original…

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