S. 271(1)(c) penalty proceedings can be stayed to await decision on quantum appeal so to avoid multiplicity of proceedings & harassment to assessee

In dealing with the assessee’s appeal, the CIT(A) enhanced the assessment by making a disallowance of Rs. 7.53 crores towards bad debts and an upward transfer pricing adjustment of Rs. 5.50 crores. The CIT(A) also initiated s. 271(1)(c) proceedings for concealment of income. The assessee filed an appeal to challenge the CIT(A)’s order and also filed a stay application seeking to restrain him from proceeding with the s. 271(1)(c) penalty proceedings. HELD by the Tribunal in dealing with the stay application:

U/s 275(1)(a), the AO cannot pass an order imposing penalty u/s 271(1)(c) if the relevant assessment is subject matter of appeal before the CIT(A). The same analogy will apply where the CIT(A) initiates penalty and the first appeal is pending before the Tribunal. Accordingly, the assessee’s request that the penalty proceedings should be stayed till the disposal of appeal by the Tribunal is not unreasonable. If the CIT(A) is allowed to proceed with the penalty proceedings, prejudice will be caused to the assessee as it will have to face multiplicity of proceedings. In case the assessee succeeds in the quantum appeal, the penalty order passed by the CIT(A) will have no legs to stand while if the assessee fails in the quantum appeal, the CIT(A) will get ample time of six months to dispose of the penalty proceedings. Therefore, to prevent multiplicity of proceedings and harassment to the assessee, the CIT(A) is directed to keep the penalty proceedings in abeyance till the disposal of quantum appeal by the Tribunal (CIT vs. Wander (Bom) referred)