M/s Surindra Enterprises, Ludhiana V. ITO, Ludhiana

ITA 1259/CHANDI/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60814 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 29-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Depreciation
• Section: 143(3); 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1259/CHD/2009 & ITA NO. 721/CHD/2010 ASSESSMENT YEAR: 2001-02 M/S SURINDRA ENTERPRISES, V ITO, WARD VI(3), P-6, TEXTILE COLONY, LUDHIANA. INDL. AREA A, LUDHIANA. PAN: AAJFS-3833N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SMT. JYOTI KUMARI DATE OF HEARING : 15.03.2012 DATE OF PRONOUNCEMENT : 09.04.2012 ORDER PER MEHAR SINGH, AM THE APPEAL IN ITA NO. 1259/CHD/2009 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.10. 2009 PASSED BY THE LD. CIT-III, LUDHIANA U/S 263 OF THE INCOME- TAX ACT,1961 (IN SHORT 'THE ACT'). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT-III LUDHIANA HAS ERRED IN PASS ING ORDER UNDER SECTION 263 OF THE INCOME-TAX ACT,1961. 2. THAT THE LD. CIT(A)-III LUDHIANA HAS ERRED IN NO T CONSIDERING THE FACT THAT ORDER U/S 143(3) WAS PASSED BY THE AO AFTER DUE APPLICATION OF MIND. 3. THAT THE LD. CIT(A)-III LUDHIANA HAS ERRED IN NO T CONSIDERING THE FACT THAT THE LD. AO DURING THE COURSE OF REMAND PROCEEDINGS BEFORE HIM, MADE ENQUIRIES FROM THE CONCERNED PRINCIPLE AND THE 2 CONCERNED PRINCIPLE HAD CONFIRMED THE FACT THAT THE DISCOUNT HAS BEEN GRANTED TO M/S GOPAL SALES CORPORATION THROUGH M/S SURINDRA ENTERPRISES. 4. THAT THE LD. CIT(A)-III LUDHIANA HAS NOT CONSIDE RED THE FACT THAT DUE AFFECT HAS BEEN GIVEN WHILE PASSING THE ORDER BY THE AO AS PER DIRECTIONS OF TH E HON'BLE INCOME TAX APPELLATE TRIBUNAL BY ROUTING THE TRANSACTION OF DISCOUNT OF M/S GOPAL SALES CORPORATION THROUGH CONSIGNEE AGENT M/S SURINDRA ENTERPRISES AND WHICH DISCOUNT HAS BEEN DISCLOSED AND STANDS ASSESSED IN THE HANDS OF M/S GOPAL SALES CORPORATION. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' NARRATED THAT IT IS SECOND INNING OF THE CASE. THE CORE ISSUE PERTAINS TO ALLOWANCE OF DISCOUNT OF RS.7,15,772/-, PASSED ON TO M/S GOPAL SALES CORPORATION. IN THE COURSE OF ASSE SSMENT PROCEEDINGS, A CONFIRMATION FROM M/S UNITED INK AND VARNISH PVT. LTD., MUMBAI WAS SUBMITTED BEFORE THE AO, ON 1 8.09.2007, AT THE TIME OF FRAMING THE ASSESSMENT. LD. 'AR' CO NTENDED THAT ISSUE OF SUCH DISCOUNT WAS ACCEPTED BY THE DEPARTME NT IN THE PRECEDING AND SUCCEEDING ASSESSMENT YEARS. LD. 'AR' REFERRED TO PAGE 19 OF THE PAPER BOOK, WHEREBY THE TRIBUNAL RES TORED THE ISSUE, FOR THE LIMITED PURPOSE, IN ITA NO. 966/CHD/ 2004, ASSESSMENT YEAR 2001-02, IN THE CASE OF ITO V SURIN DRA ENTERPRISES, VIDE PARA 8 OF THE ORDER DATED 27.02.2 007. THE HON'BLE TRIBUNAL RESTORED THE ISSUE INDICATING THA T IF THE ASSESSEE PROVES THAT THE DISCOUNT WAS DIRECTLY PAID TO THE SUB- DEALER NAMELY G.S.C. BY THE PRINCIPAL, THEN NO ADDI TION IS CALLED 3 FOR. ACCORDINGLY, THIS ISSUE WAS REMANDED BACK BY THE TRIBUNAL, FOR THE SAID LIMITED PURPOSE, TO THE FILE OF THE AO. THE LD. CIT INVOKED THE PROVISIONS OF SECTION 263 OF TH E ACT AND VIDE ORDER DATED, 30.10.2009, ENHANCED THE INCOME OF THE ASSESSEE BY THE SAID AMOUNT OF DISCOUNT OF RS.7,15,772/-. T HE LD. CIT ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, IN THE MATTER. THE LD. 'AR' CONTENDED THAT THE INVOCA TION OF THE PROVISIONS OF SECTION 263 OF THE ACT IS BAD IN LAW AND FALLS BEYOND THE PURVIEW OF SECTION 263 OF THE ACT. LD. 'AR' ALSO FILED WRITTEN SUBMISSIONS IN THE MATER, WHICH ARE REPRODU CED HEREUNDER : 3.FOR EFFECTING THE SALES, AND ALSO THAT THE APPEL LANT HAD BEEN ENGAGED IN THE TRADING OF OTHER ITEMS, HE HAD APPOI NTED A DEALER IN THE NAME OF M/S GOPAL SALES CORPORATION, WHO WAS MA KING ALL THE SALES ON BEHALF OF THE APPELLANT AND WAS BEING PAID 1% COMMISSION, OUT OF 5% RECEIVED FROM M/S UNITED INK & VARNISH CO .PVT. LTD., BY THE CONSIGNEE AGENT. HOWEVER, SINCE THAT 1% WAS NOT SUFFICIENT TO MEET DAY TO DAY EXPENSES BY M/S GOPAL SALES CORPORA TION, IT WAS AGREED BETWEEN THE CONSIGNEE AGENT AND M/S GOPAL SA LES CORPORATION AND UNDER CONSULTATION WITH THE PRINCIP LE THAT THE DISCOUNT WHICH THE CONSIGNEE AGENT WAS ENTITLED, SHOULD BE PASSED ON T O M/S GOPAL SALES CORPORATION, LUDHIANA. 4. THE ASSESSING OFFICER HAD DOUBTED THE PAYMENT OF 1% AND DISCOUNT PASSED ON TO M/S GOPAL SALES CORPORATION, AND THE APPELLAN T HAD SUBMITTED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THAT THIS PRACTICE HAD BEEN CARRIED ON SINCE LONG AND SUCH PAYMENTS EARLIER MAD E BY THE APPELLANT TO M/S GOPAL SALES CORPORATION HAD BEEN ALLOWED AS EXP ENSES IN THE HAND OF THE APPELLANT AND ALSO THE SAME HAS BEEN DISCLOSED BY M/S GOPAL SALES CORPORATION AS INCOME IN HIS RETURN OF INCOME AND A SSESSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 5. DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER HAS MADE THE ADDITION ON ACCOUNT OF COMMISSION AND DISCOUNT PAID BY THE APPELLANT TO 4 M/S GOPAL SALES CORPORATION AND THE CIT (A) HAD ALL OWED THE RELIEF TO THE ASSESSEE, SINCE ACCORDING TO HIM, THE PAYMENT OF CO MMISSION AND DISCOUNT WAS NECESSITATED BY THE DICTATES OF THE BUSINESS REQUIR EMENT AND, THUS, HAD ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE MATTER WAS CARRIED TO THE INCOME TAX APPELLA TE TRIBUNAL AND THE ITAT REGARDING 1% COMMISSION HAD ALLOWED THE RELIEF TO T HE ASSESSEE AND AS REGARDS THE PAYMENT OF DISCOUNT, THE FOLLOWING FIND ING HAD BEEN GIVEN BY THE ITAT IN PARA-8 OF THE ORDER: 'HOWEVER, AS REGARDS TO THE DISCOUNT IS CONCERNED, MAIN CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DISCOU NT WAS DIRECTLY PASSED TO THE SUB-DEALER I.E. G.S.C BY THE PRINCIPA L. HOWEVER, NO EVIDENCE HAD BEEN BROUGHT ON RECORD THAT THE DISCOU NT WAS PASSED ON TO THE SUB DEALER BY THE PRINCIPAL. LD. CIT (A) HAS AL SO NOT THROWN ANY LIGHT ON THIS ISSUE THAT THE PRINCIPAL HAD DIRECTLY PASSED ON THE ENTIRE DISCOUNT TO THE SUB DEALER. SINCE THE FACTS ARE NOT AVAILABLE ON RECORD, SO, WE ARE UNABLE TO REACH ON A RIGHT CONCL USION. IN THAT VIEW OF THE MATTER, WE REMAND THIS LIMITED ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. IF THE ASSESSEE PRO VES THAT THE DISCOUNT WAS DIRECTLY PAID TO THE SUB DEALER NAMELY G.S.C. BY THE PRINCIPAL, THEN NO ADDITION IS CALLED FOR. ACCORDIN GLY, THIS ISSUE IS REMANDED BACK FOR THE AFORESAID LIMITED PURPOSE TO THE ASSESSING OFFICER.' 7. THE ASSESSING OFFICER HAS DISCUSSED THE SEQUENCE OF ABOVE ISSUE IN HIS ORDER AND IN ORDER TO VERIFY THE FACT THAT WHETHER THE DISCOU NT WAS PASSED ON TO GOPAL SALES CORPORATION, THE ASSESSING OFFICER HAD MADE THE NECESSARY QUERIES FROM PRINCIPAL I.E. M/S UNITED INK & VARNIS H CO.LTD., SUBHASH ROAD, VILLAGE PARLE, MUMBAI AND THE PRINCIPAL HAD C ONFIRMED THE SAME TO THE ASSESSING OFFICER AND ON THE BASIS OF SUCH CONF IRMATION, THE ASSESSING OFFICER HAD DULY APPLIED HIS MIND WITH REGARD TO TH E FACT THAT THE APPELLANT WAS ONLY A CONSIGNEE AND A CONDUIT PIPE FOR TRANSFE RRING THE DISCOUNT TO GOPAL SALES CORPORATION, WHO HAD BEEN EFFECTING ALL THE SALES. THE PAYMENT OF DISCOUNT HAD TO BE ROUTED THROUGH HIM ONLY AND IT W AS JUST A MODE OF PASSING THE ENTRIES, WHICH HAVE BEEN PASSED THROUGH THE BOO KS OF CONSIGNEE AGENT AND ACCOUNTED FOR BY M/S GOPAL SALES CORPN. 8. THEREFORE, THE ASSESSING OFFICER WAS CONVINC ED THAT DISCOUNT HAD BEEN MADE TO M/S GOPALSALES CORPORATION AND THIS IS C ONFIRMED FROM THE LETTER OF M/S UNITED INK & VARNISH CO. PVT. LTD, AN D COPY OF THE SAME HAD 5 BEEN PLACED AT PAGE-2 OF THE PAPER BOOK. THIS LETT ER FURTHER PROVES THAT PRINCIPLE WAS IN KNOWLEDGE OF MAKING THE PAYMENT OF DISCOUNT TO M/S GOPAL SALES CORPORATION AND FURTHER THE CONSIGNEE IS ONLY ENTITLED TO COMMISSION AND DISCOUNT IS ALLOWED TO THE DEALER ONLY. 9. THUS, THERE HAD BEEN DUE APPLICATION OF MIND BY THE ASSESSING TO THE ISSUE IN HAND AND WHICH FACT IS BORNE OUT FROM THE ORDER OF THE ASSESSING OFFICER AND, THUS, THE ADEQUATE ENQUIRIES HAVE BEEN MADE TO PROVE THAT THE BENEFICIARY OF THE RECEIPT OF THE DISCOUNT HAD BEEN THE GOPAL SALES CO RPORATION AND THIS IS INDEPENDENT CONCERN, BEING ASSESSED TO TAX AND THAT DISCOUNT EARNED HAD SUFFERED TAX IN THE HAND OF GOPAL SALES CORPORATION AND, THE REFORE, ONCE THE ASSESSING OFFICER HAD APPLIED OF THE ORDER OF THE ITAT, THE C IT COULD NOT EXERCISE THE JURISDICTION U/S 263 OF THE ACT 10. RELIANCE IS BEING PLACED ON THE FOLLOWING JUDGMENTS: NAME OF THE CASE RELEVANT PAGE NOS. I. CIT V/S R K CONSTRUCTION CO. 1 -8 (2008) 12DTR(GUJ)210 II) AMRIK SINGH V/S ASSTT COMMISSIONER OF INCOM E TAX 9-11 (2010)36DTR9(CHD-TRIB) 111 III) ADDL. CIT, GHZ V/S SHIPRA ESTATE LTD 12-16 (201 0)35 SOT 256 (DEL) IV) COPY OF THE JUDGMENT IN THE CASE OF M/S LITTLE BEE IMPEX V/S 17-32 ADDL. CIT, KHANNA VIDE ITA NO.36 AND 37/CHD/2009 PA SSED BY THE HON'BLE ITAT CHANDIGARH BENCH, CHANDIGARH V) COPY OF THE JUDGMENT IN THE CASE OF SMT SAVI TA GOYAL V/S ITO 33-38 PASSED BY ITAT, CHANDIGARH BENCH IN ITA NO.438/CHD/ 2007 FOR THE 2002-2003 VI) HARI IRON TRADING CO. V CIT (2003) 263 ITR 437 (P&H) 47-58 11. THE SHOW CAUSE NOTICE OF THE CIT IS CONTAINED A T PAGE-1 OF THE PAPER BOOK AND OUR REPLY IS AT PAGES 3 TO 5 AND 6 TO 7 AN D THE FINDING OF THE CIT IS THAT SINCE THE DISCOUNT HAD NOT BEEN PASSED DIRECTL Y AND, THEREFORE, THE DIRECTIONS OF THE ITAT HAVE NOT BEEN FOLLOWED AND, AS SUCH, THE ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 12. THIS FINDING OF THE CIT IS NOT CORRECT BECAUSE ALL THE PAYMENTS HAD TO BE REMITTED THROUGH THE CONSIGNEE AGENT I.E. APPELLANT AND THE FACT THAT THE DISCOUNT HAD BEEN PASSED ON TO GOPAL SALES CORPORAT ION BY WAY OF TRANSFER ENTRIES OUT OF THE DISCOUNT RECEIVED FROM PRINCIPAL I.E. M/S UNITED INK & VARNISH CO. PVT. LTD, AND WHICH FACT HAS THOROUGHLY BEEN VERIFIED BY THE 6 ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND EVEN THE CIT HAS NOT DOUBTED ABOUT PAYMENT OF DISCOUNT TO GA PAL SALE CORPORATION AND, THEREFORE, THE FINDING OF THE CIT FOR ENHANCIN G THE INCOME ON THE PLEA THAT THE DIRECTIONS HAVE NOT BEEN FOLLOWED AND INTE RPRETING THE WORD DIRECTLY IN ABSOLUTE STRICT MANNER IS NOT CORRECT. 13. BUT THE FACT REMAINS THAT THE DISCOUNT HAD ULTIMATE LY BEEN RECEIVED BY GOPAL SALES CORPORATION AS PER PAST PRACTICE, THIS HAS ALSO BEEN MENTIONED IN THE ORDER OF THE ITAT AND, THEREFORE, THE ASSESS MENT IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. 14. LASTLY, IT MAY BE STATED THAT .EVEN THE ENHANCEMENT OF INCOME WAS NOT PROPER BY THE CIT BECAUSE OF THE FACT THAT THE ASSE SSING OFFICER AND CIT BOTH HAVE CONCLUSIVELY STATED THAT THE DISCOUNT HAV E BEEN PASSED TO M/S GOPAL SALES CORPORATION AND, THUS, THE ASSESSMENT I S NOT PREJUDICIAL TO THE INTEREST OF REVENUE. THIS IS BECAUSE OF THE FACT TH AT BOTH THE CONDITIONS WITH REGARD TO THE ASSESSMENT BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE HAVE TO BE SATISFIED AND SINCE THE CIT HAD NOT RAISED ANY DOUBT WITH REGARD TO THE PAYMENT OF DISC OUNT TO M/S GOPAL SALES CORPORATION, THE ASSESSMENT CANNOT BE SAID TO BE PREJUDICIAL TO THE INTEREST OF REVENUE AND, THEREFORE, ON THIS ACCOUNT TOO, THE ORDER OF THE CIT DESERVES TO BE QUASHED. 4. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE CIT . 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND RELEVANT RECORDS. IN THIS CO NTEXT, IT IS PERTINENT TO REPRODUCE THE RELEVANT PART OF T HE ASSESSMENT ORDER PASSED BY THE AO, FOR THE ASSESSMENT YEAR UND ER REFERENCE. ASSESSMENT IN THIS CASE WAS COMPLETED VIDE ORDER U /S 143(3) OF INCOME TAX ACT, 1961 DATED 31.03.2004 AT TOTAL INCO ME OF RS. 15,37,2507- AFTER MAKING CERTAIN ADDITIONS/ DISALLO WANCES. AGGRIEVED WITH THIS ORDER, ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS)-I, LUDHIANA. TH E LD. CIT(A) VIDE ORDER DATED 18.06,2004 PASSED IN APPEAL NO,6-R R/CIT(A)- 7 I/2004-05 DELETED ALL THE ADDITIONS EXCEPT DISALLOW ANCE OF RS. 59,7607- OUT OF CAR MAINTENANCE, DEPRECIATION, LOAN INTEREST AND INSURANCE AND RS.23,9707-OUT OF TELEPHONE EXPENSES MADE BY THE A.O. THE DEPARTMENT HAS FILED SECOND APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH AGAINST THE DELE TION OF ADDITIONS OF RS.7,15,772/- AND RS. 1,39,918/- MADE ON ACCOUNT OF DISCOUNT AND COMMISSION PAID TO M/S GOPAL SALES CORP. THE LD. ITAT, CHANDIGARH BENCH (B) VIDE ITS ORDER DATED 27.02.2007 IN ITA NO.966/CHANDI/2004 REMANDED THE ISSUE OF ADD ITION OF RS.7,15,772/- TO THE FILE OF A.O. FOR FRESH ADJUDIC ATION AND HELD THAT IF THE ASSESSEE PROVES THAT THE DISCOUNT WAS D IRECTLY PAID TO THE SUB DEALER NAMELY, G.S.C.BY THE PRINCIPAL, THEN NO ADDITION IS CALLED FOR. FRESH NOTICE U/S 143(2) WAS ISSUED ON 0 9.07.2007 FIXING THE CASE FOR HEARING ON 17.07.2006. IN RESPO NSE TO THIS NOTICE, SH. SUDHIR SEHGAL, ADVOCATE AND SH. SAURABH SEHGAL, C.A. ATTENDED THE ASSESSMENT PROCEEDINGS, WITH WHOM THE CASE WAS DISCUSSED. A LETTER WAS SENT TO M/S UNITED INK & VA RNISH CO. PVT. LTD., SUBHASH ROAD, VILE PARLE (EAST), MUMBAI ON 27 .09.2007 THROUGH FAX REQUESTING IT TO SEND CONFIRMATION REGA RDING DISCOUNT OF RS.7,15,772/- GIVEN TO M/S SURINDRA ENTERPRISES, LUDHIANA. CONFIRMATION LETTER IN THIS REGARD WAS SUBMITTED TH ROUGH FAX BY M/S UNITED INK & VARNISH CO. PVT. LTD, MUMBAI ON 18 .09.2007. THE CLAIM MADE BY THE ASSESSEE IS CORRECT. AFTER DI SCUSSION, INCOME OF THE ASSESSEE IS RECOMPUTED AS UNDER : INCOME AS PER RETURN. RS.2,47,380/- ADD: I) DISALLOWANCE OUT OF CAR MAINTENANCE EXPENSE S AS CONFIRMED BY THE CIT(A). RS.59,760/- II) DISALLOWANCE OUT OF TELEPHONE EXPENSES AS CONFIRMED BY THE CIT(A)- RS. 23.960/- TOTAL INCOME ASSESSED: RS.3.31.100/- ASSESSED. ISSUE DEMAND NOTICE & CHALLAN ALONGWITH COPY OF THIS ORDER. CHARGE INTEREST U/S 234B. 6. A BARE PERUSAL OF THE ASSESSMENT ORDER REVEALS T HAT THE AO HAS CONSIDERED AND APPLIED HIS MIND TO THE ISSUE OF DISCOUNT, WHILE FRAMING THE ASSESSMENT ORDER, AS IS EVIDENT F ROM THE 8 RELEVANT PART OF THE SAID ASSESSMENT ORDER. THE AO MADE WARRANTED ENQUIRY IN THE MATTER AND OBTAINED CONFIR MATION FROM M/S UNITED INK & VARNISH CO. PVT.LTD., MUMBAI ON 18 .09.2007 AND CONSIDERED THE SAME WHILE ADJUDICATING THE ISSU E, RESTORED TO HIS FILE BY THE TRIBUNAL. IN A NUT-SHELL, THE A O HAD MADE DUE ENQUIRY, VERIFICATION INDEPENDENTLY AND OBJECTIVELY APPLIED HIS MIND TO THE ISSUE IN QUESTION AND FRAMED THE ASSESS MENT. THE CIT INVOKED THE PROVISIONS OF SECTION 263, MERELY O N THE GROUND OF EXPRESSION I.E. DIRECTLY PAID USED BY THE HON' BLE TRIBUNAL, WHILE RESTORING THE MATTER TO THE FILE OF THE AO. IN OUR CONSIDERED OPINION, THE ISSUE IN QUESTION HAD LED T O INVOCATION OF PROVISIONS OF SECTION 263 BY THE CIT HAS BEEN DU LY CONSIDERED AND ADJUDICATED BY THE AO. THERE IS NO ASSUMPTION OF INCORRECT APPLICATION OF LAW BY THE AO IN THE MA TTER. THE AO HAD MADE REQUISITE ENQUIRY AND APPLIED HIS MIND, BE FORE RECORDING THE FINDINGS IN THE SAID ASSESSMENT ORDER IN THE MATTER IN QUESTION. THEREFORE, HAVING REGARD TO TH E LEGISLATIVE INTENT, CONTAINED IN THE PROVISIONS OF SECTION 263 OF THE ACT AND PLETHORA OF JUDICIAL VERDICTS IN THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR INVOCATION OF THE PROVISIONS OF SECTION 263 OF THE ACT. THEREFO RE, THE CIT ACTED BEYOND HIS JURISDICTION, AS CONTEMPLATED U/S 263 OF THE ACT. IN VIEW OF THIS, AND HAVING REGARD TO THE DECI SIONS RELIED UPON BY THE LD. 'AR', THE ORDER PASSED BY THE CIT U /S 263 OF THE ACT DESERVES TO BE SET ASIDE AND, HENCE, THE SAME I S SET ASIDE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 9 ITA NO. 721/CHD/2010 8. THIS IS AN APPEAL AGAINST THE ORDER PASSED BY TH E CIT U/S 271(1)(C) OF THE ACT ON 22.04.2010 IMPOSING PENALTY OF RS.2,40,483/-. HAVING REGARD TO THE FINDINGS GIVEN BY US IN ITA NO. 1259/CHD/2009, WHEREBY THE ORDER PASSED BY THE CIT U/S 263 WAS QUASHED, THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF ADDITION MADE IN PURSUANCE OF THE ORDER PASSED U/S 263 OF THE ACT, CANNOT SURVIVE. AS THE FOUNDATION O F THE LEVY OF PENALTY CEASES TO EXIST, THE SAID PENALTY ORDER CAN NOT BE SUSTAINED. IN VIEW OF THIS, AS THERE DOES NOT EXIS T THE VERY GROUND OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, THE ORDER PASSED BY THE CIT WHEREBY THE IMPUGNED PENALTY WAS LEVIED ON THE ASSESSEE, BECOMES NONEST. ACCORDINGLY, THE APP EAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 9 TH APRIL,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH