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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH & DR. ARJUN LAL SAINI
O R D E R PER (Dr.) A.L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by assessee, pertaining to Assessment Year (AY) 2011-12, is directed against the order passed by the ld. Commissioner of Income Tax (Appeals)-3 [in short “the CIT(A)-3”], Ahmedabad in Appeal No. CIT(A)- 13/Ahd/54/2014-15 dated 26.10.2015, which in turn arises out of an assessment order passed by Assessing Officer, under section143(3) of the Income Tax Act 1961, (hereinafter referred to as “the Act”), dated 24.03.2014.
The assessee has raised the following grounds: “1) The order passed by the learned CIT(A) is bad in law, non est and not within the four corners of law and therefore deserves to be quashed and set aside. 2) It is submitted that, penalty under section 271(1)(c) is based on "tax sought to be evaded" however in the instant case, the assessee was having refund balance of Rs. 40,05,119/- lying with die department and therefore, it cannot be said that, there is an existence of "tax sought to be evaded" and therefore, the penalty imposed but cannot be quantified in the interest of justice by the learned assessing officer.
2 ITA.14/SRT/2021/ AY.2011-12 Mohmed Ismail Vakhawala 3) It is further submitted that, as per settled position, where deduction has been claimed with bonafide intention but was not considered as admissible then, penalty cannot be imposed under section 271(1)(C). 4) Considering the facts of the case, the assessee has not concealed anything or filed inaccurate particulars of income and therefore, no penalty under section 271(1)(c) be imposed in the interest of justice. 5) The assessee craves to condone the delay caused in preferring appeal for the reasons stated in the delay condoned application. 6) The assessee craves for leave to add or amend any of the grounds of appeal
.”
3. At the outset, Learned Counsel for the assessee begins by pointing out that during the assessment stage, the Assessing Officer has levied penalty under section 271(1)(c) of the Act stating that assessee has furnished inaccurate particulars of income and concealment of income, however during the penalty proceedings, the Assessing Officer has levied the penalty on account of furnishing inaccurate particulars of income. Therefore, the first grievance of the ld. Counsel is that there is no any definite charge/ accusation on the assessee, whether initiation of penalty proceeding is on account of ‘concealment of income’ or on account of ‘furnishing inaccurate particulars of income’. Therefore, ld Counsel prays the Bench that penalty may be deleted.
4. On merits, Learned Counsel submitted that there was a bona fide belief that Employee Stock Option Plan (ESOP) should not be assessable as income from salary, therefore, assessee could not offer the same for taxation and hence the penalty should not be levied. He further submitted that, as per settled position, where deduction has been claimed with bona-fide intention but was not considered as admissible then, penalty cannot be imposed under section 271(1)(C) of the Act.
5. Apart from this, ld Counsel submitted before us written submission, the important part of these written submissions, are reproduced below: “4.1.1) The assessee most humbly and respectfully submits that, penalty notice has been issued for furnishing inaccurate particulars of income for the financial year relevant to the assessment year 2011-2012. The learned assessing officer has arrived to a conclusion that, the assessee has not offered income from ESOP of 3 ITA.14/SRT/2021/ AY.2011-12 Mohmed Ismail Vakhawala M/s Gujarat Gas Company Limited. This finding is placed in the Assessment order passed by the learned assessing officer. Since, this finding is the backbone of the assessment and addition to the taxable income, penalty proceedings were initiated under section 271(1)(C) of the Act without specifying the limb under which penalty proceedings are initiated.
4.1.2) The assessee respectfully submits that, the factual finding of the Learned Assessing officer is grossly incorrect. It is not that, the assessee has not offered income to tax. The assessee has offered income of ESOP to tax and claimed deduction under the provisions of section 90 read with clause 15 of the DTAA between India and Kazakhstan, in the most humble and respectful submission of the assessee, finding for initiation of penalty proceedings is factually incorrect, then, no proceedings under section 271(1)(C) could survive.
4.1.3) The assessee further submits that, the learned assessing officer has not specified in the operative portion of the assessment order, under which limb, penalty proceedings under section 271(1)(c) is sought to be initiated. Even in the notice issued under section 274 of the Act, relevant portion has not been strike off by the learned assessing officer and therefore, penalty proceedings suffer from the initial defect and no proceedings could survive in the interest of justice, it is only on perusal of the penalty order, it appeared that, penalty is levied for "furnishing inaccurate particulars of income''. The assessee refers to the judgment of Hon'ble ITAT, Mumbai in the case of Eon Aviation (P) Ltd vs DCIT (Date of judgment: 29.06.2018).”
On the other hand, the Ld. DR for the Revenue has submitted that assessee could not represent his case before Ld. CIT(A) and the order being an ex-parte order, stood vitiated on account of violation of principle of natural justice. The ld. DR therefore, contended that in the interest of justice, another opportunity to contest the appeal before the Ld. first appellate authority may be granted to the assessee. On merits, Ld DR has primarily reiterated the stand taken by the Assessing Officer and prayed the Bench that matter may be remitted back to the file of the ld CIT(A) for adjudication on merits.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that the assessee, Mr.
4 ITA.14/SRT/2021/ AY.2011-12 Mohmed Ismail Vakhawala Mohammad Ismail Vakhawala, is an individual and Non-resident during the financial year relevant to the assessment year 2011-2012 under the provisions of section 6 of the Income Tax Act, 1961 and has filed his return of income for the financial year relevant to the assessment year 2011-2012 declaring total income of Rs. 16,749/- on 30.07.2011. The case of the assessee was taken up for scrutiny and assessment u/s 143(3) of the Income Tax Act, 1961 was completed on 24.03.2014 determining total income of Rs.38,66,770/- making additions of Rs. 38,50,025/- which includes an addition of Rs.37,69,625/- made on account of income arises due to Employee Stock Option Plan (ESOP). Simultaneously, penalty proceedings u/s 271(1)(c) of the Income Tax Act 1961 were initiated on the very same issue. On appeal, ld CIT(A) has confirmed the penalty imposed by the assessing officer u/s 271(1)(c) of the Income Tax Act 1961, therefore, the assessee is in further appeal before this Tribunal.
During the appellate proceedings, the ld CIT(A) has issued four notices of hearings but assessee took only adjournments and neither filed written submissions nor appeared before ld CIT(A) to plead his case. We note that ld CIT(A) did not adjudicate the issue as per the mandate of provisions of section 250(6) of the Act. We note that in the assessee’s case under consideration, the assessment was carried out u/s 143(3) of the Act and the impugned order passed by the ld. CIT(A), is an ex parte order and non-speaking order, therefore, we do not wish to make any comments on the merits of the grounds raised by the assessee. Considering the above facts, we note that assessee could not plead his case successfully before the ld. CIT(A), hence it is a violation of principle of natural justice. We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, without delving much deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of Ld. CIT(A) for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee, who in turn, is also directed to contest his stand forthwith. Therefore, we deem it fit and proper to set aside the 5 ITA.14/SRT/2021/ AY.2011-12 Mohmed Ismail Vakhawala order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, the appeal of the assessee is treated as allowed.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 25/08/2021 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.