KAERIPATTUNAM VISWANATHAN POWNRAJ,KRISHNAGIRI vs. ACIT, CIRCLE-1, HOSUR

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi dated 01.03.2023 relevant to the assessment year 2011-12 passed under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short].

Brief facts of the case are that as per the information available on record, the assessee has made cash deposits of ₹.1,15,14,970/- during the financial year 2010-11 relevant to the assessment year 2011-12 in the bank account held with various banks. On verification of the records, the Assessing Officer noted that the assessee has not filed his return of income. Since the Assessing Officer believed that the income chargeable to tax amounting to ₹.1,15,14,970/- has escaped assessment, notice under section 148 of the Act dated 21.03.2018 was issued requiring the assessee to file the return of income. In response to the notice, the assessee filed his return of income for the assessment year 2011-12 on 11.12.2018 declaring total income of ₹.5,57,920/-. After following due procedure, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 147 of the Act dated 18.12.2018 by accepting the income returned by the assessee.

Subsequently, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act by issuing notice under section 274 r.w.s. 271(1)(c) of the Act dated 06.12.2018. After considering the submissions of the assessee, the Assessing Officer levied penalty of ₹.46,952/- under section 271(1)(c) of the Act on the ground that the assessee has failed to file the return of income before the time limit prescribed in section 153(1) of the Act. On appeal, the ld. CIT(A) dismissed the appeal since the assessee has not responded to the notices issued by the ld. CIT(A).

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the income returned by the assessee in his return of income has been accepted by the Assessing Officer vide his order under section 143(3) r.w.s. 147 of the Act. When there was no motive on the part of the assessee for the belated filing of the return, penalty proceedings cannot be initiated. In the absence of “mens rea”, the penalty levied needs to be cancelled. It was further submission that the ld. CIT(A) has not adjudicated the issue on merits.

On the other hand, the ld. DR supported the order passed by the ld. CIT(A).

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Against the penalty levied under section 271(1)(c) of the Act, the assessee filed an appeal before the ld. CIT(A). However, the ld. CIT(A) upheld the penalty levied by the Assessing Officer and dismissed the appeal of the assessee in the absence of any reply/submissions in response to various notices issued by the ld. CIT(A). We have perused the appellate order and find that the ld. CIT(A) has not adjudicated the levy of penalty under section 271(1)(c) of the Act when there was no motive on the part of the assessee for the belated filing of the return. Accordingly, we set aside the appellate order and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits in accordance with law by affording an opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.