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Facts
The appellant company did not file income tax returns for AY 2013-14 & 2014-15 despite having taxable interest income, claiming ongoing disputes. The Assessing Officer levied a penalty under Section 271(1)(c) for non-filing, which was subsequently confirmed ex-parte by the CIT(A) due to the appellant's repeated non-response to notices. The appellant's rectification petition under Section 154 was also rejected by the CIT(A).
Held
The Tribunal condoned the delay in filing the appeal. While noting the appellant's repeated non-compliance, it decided to give a final opportunity due to the company's stated closure and pending disputes, setting aside the matter to the CIT(A) for fresh consideration on merits after allowing the appellant to make all submissions. A cost of Rs. 10,000/- for each assessment year was imposed on the appellant for non-compliance.
Key Issues
Key legal issues included the exigibility of penalty under Section 271(1)(c) for non-filing of returns when a company cites pending disputes and closure, and the validity of ex-parte confirmation of such penalties by the CIT(A) without a full consideration of merits.
Sections Cited
271(1)(c), 154
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Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Shri Anikesh Banerjee (JM) & Shri Omkareshwar Chidara (AM)
Per Omkareshwar Chidara (AM) :- Before going into the merits of the case, it is observed that there is a delay of 227 days in filing of appeal by appellant company. The Ld. AR of the appellant company has stated that the company was closed and lot of disputes are going on pending adjudication before Hon'ble High Court and hence requested for condoning the delay in filing of appeal. After hearing the case, it was decided to condone the delay and decided to proceed to adjudicate the matter on merits.
For both the assessment years 2013-14 & 2014-15, the issue to be adjudicated is the same i.e. whether penalty under section 271(1)(c) of the Income Tax Act is exigible in the facts and circumstances of the case. The Ld. AO levied penalty under section 271(1)(c) stating that the appellant company has got taxable income being the interest received/accrued during concerned assessment year, but still returns of income were not filed for the concerned assessment years. The appellant company was specifically asked by the Ld. AO as to why returns of income were not filed even though they
2 M/s. Bul MSK Infrastructure Pvt. Ltd. are having taxable income for which appellant company replied that there are certain disputed matters, which are pending adjudication before Hon'ble High Court and hence no returns of income were filed for both the assessment years. During the assessment proceedings also, the same plea was taken by the appellant company and since returns of income were not filed despite having taxable income, the Ld.AO made additions and completed the assessments. Consequently, penalty under section 271(1)(c) of the Act was also levied subsequently. Appellant company is in appeal against penalties levied under section 271(1)(c) of the Act for both the assessment years. While levying penalty, the Ld. AO relied on the decisions of Hon'ble Supreme Court in the case of Shri K. Madhusoodanan Vs. CIT (251 ITR 99) and Union of India Vs. Dharmendra Textile Processors & Ors. (306 ITR 277) and held that explanation appended to section 271(1)(c) of the Act comes into play when the appellant conceals or gives inaccurate particulars while filing returns. It was also observed from the penalty order that penalty under section 271(1)(c) of the Act is a civil liability and willful concealment is not an essential ingredient for attracting civil liability and as such appellant company is liable to be penalized under section 271(1)(c) of the Act. Accordingly, the Ld. AO concluded stating that the appellant company willfully and intentionally tried to wrongly represent the facts and avoiding paying its due tax liability. As the claim made by the appellant is devoid of any legal basis, the Ld. AO levied penalty. In the penalty order, it was also mentioned that approval was taken from the concerned superior authority, before levying penalty.
Ld. CIT(A) confirmed the penalty order of Ld. AO. From the order of Ld. CIT(A), it was noticed that ten opportunities were given with regard to the assessment years 2013-14 & 2014-15. Since there was no response, Ld. CIT(A) dismissed the appeals of appellant company for both the assessment years. Ld. CIT(A) also relied on the same decisions mentioned in the assessment order.
3 M/s. Bul MSK Infrastructure Pvt. Ltd.
Since the order of Ld. CIT(A) was ex-parte, appellant company filed rectification petition under section 154 of the Act requesting the Ld. CIT(A) to recall the order stating that the company is already closed and it is running with minimum staff and hence could not appear to respond to the notices issued. Ld. CIT(A), for both the assessment years has taken up these petitions under section 154 of the Act and after considering the facts and also placing reliance on the decisions of T.S. Balaram, ITO Vs. Volkart Brothers (1971) 82 ITR 50 (SC), and Mepco Industries Ltd. (185 Taxman 409) (SC) held that a debatable issue cannot come within the purview section 154 of the Act and moreover Ld. CIT(A) passed this order after thoughtful consideration has upheld the imposition of penalty. Since there was no mistake which is apparent from record from the order of Ld. CIT(A), the same as rejected.
Aggrieved by the orders of Ld. CIT(A) in confirming the penalty order under section 154 of the Act, the appellant company filed an appeal before the ITAT where several grounds of appeal were raised like non-consideration of audited balance sheet, Form 26AS and order of Ld. CIT(A) is not correct. It was also mentioned in the grounds of appeal that principles of natural justice are violated and appellant should not suffer due to gross negligence and inaction of their legal consultant. Finally, it was argued by Ld. AR of the appellant that the order of Ld. CIT(A) may be set aside and direct the Ld. CIT(A) to consider the matter on merits in view of the circumstances mentioned above.
6. Ld. DR relied on the orders of the lower authorities, especially the Order of Ld. CIT(A) where it was mentioned that ten opportunities were given to the appellant company to file their submissions and still there was no reply and hence penalty order passed by the Ld. AO and confimred by Ld. CIT(A) should be upheld.
4 M/s. Bul MSK Infrastructure Pvt. Ltd.
Heard both sides and perused the record. It is the fact that there is non-compliance by appellant company before Ld. AO and Ld. CIT(A). Despite several opportunities given to them, there was no response. But at the same time, what is to be seen is that the company is closed and not many staff are working to take care of the affairs of the company and apparently there are certain disputes among the directors/with outsiders and disputes are pending before the High Court. In view of the same, it is decided to give one last opportunity to appellant company to represent its case before Ld. CIT(A). Ld. AR may file all his submissions before Ld. CIT(A) without seeking further adjournment. The Ld. AO is directed to take into consideration all submissions made by appellant company including audited balance sheet, Form 26AS and whether appellant company is having taxable income at all etc. Accordingly after giving effective opportunity to appellant, penalty order may be passed on the basis of merits and legal position afresh.
As mentioned above, since it is an undisputed fact that the appellant has not complied with even though ten notices were issued by the department. There was no proper compliance before the ld. AO or Ld. CIT(A) despite several opportunities being given, the Bench decided to impose cost of Rs. 10,000/- each for A.Y. 2013-14 and 2014-15. This amount should be paid to Maharashtra State Legal Aid Fund”.
Accordingly, the matter is set aside to the file of Ld. CIT(A) and both the appeals of appellant are allowed for statistical purposes.
Order pronounced in the open Court on 14/10/2025.