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Facts
The assessee declared income which was selected for scrutiny. Subsequently, an assessment order was passed with additions for business loss and house property income. Penalty proceedings were initiated under Section 271(1)(c) for inaccurate particulars, leading to a penalty order. The assessee's appeal before the Commissioner was dismissed.
Held
The Tribunal observed that the assessment and penalty proceedings were conducted during the Covid-19 period, potentially limiting the assessee's opportunity to present its case. The prior appeal order from the CIT(A) was also ex-parte. Therefore, the Tribunal decided to remand the case to the Assessing Officer for a fresh decision.
Key Issues
Whether the penalty levied under Section 271(1)(c) is valid when assessment and penalty proceedings were conducted during Covid-19, potentially impacting the assessee's ability to present its case, and if the CIT(A)'s ex-parte order further warrants a remand.
Sections Cited
143(3), 147, 144, 144B, 271(1)(c), 274, 250, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & MS. PADMAVATHY S
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 18.09.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2013-14.
M/s. Jagruti Computech Pvt. Ltd.
In the instant case, the Assessee had declared its total income at Rs.8,52,840/- by filing its return of income on dated 12.09.2013 which was selected for scrutiny assessment u/s 143(3) of the Act and resulted into passing the assessment order dated 29.03.2022 u/s 147 r.w.s. 144 & 144B of the Act and making the addition of Rs.37,34,540/- (Rs.36,53,037/- + Rs.81,505/-) on account of disallowance of business loss and income from house property and interest income.
The Assessing Officer (AO) also initiated the penalty proceedings u/s 271(1)(c) of the Act for filing of inaccurate particulars of income and consequently issued the notice u/s 274 of the Act and vide ex-parte penalty order dated 23.09.2022 u/s 271(1)(c) of the Act, ultimately levied the penalty to the tune of Rs.11,53,973/- @ 100% of the tax sought to be evaded on the income of Rs.37,34,540/-.
The Assessee, being aggrieved, challenged the levy of penalty before the Ld. Commissioner, who vide impugned order affirmed the penalty levied by dismissing the appeal and holding as under:
“6.18 In the present case, the appellant failed to offer any explanation for short admission of receipts to the extent of Rs 16,12,014/-, details of c/f business loss claimed before AO both during reassessment proceedings and also during penalty proceedings both of which are passed ex-parte, thus attracting provisions of Explanation 1 of section 271(1)(c). During appeal proceedings also appellant has not made any effort to provide details of carried forward loss, current year loss. Whatever details with regard to loss for different years mentioned in the M/s. Jagruti Computech Pvt. Ltd. return are actually noticed from returns of income filed for different years. Reason for not furnishing details of loss is obvious. The appellant do not want to make it clear that the company for the current year treated part of rent as business income which was earlier offered by appellant itself under the head 'Income from House property'. Further appellant do not want AO to notice that there was no business income in hands of appellant for assessment years 2011-12 (where 143(1) was done), and for assessment year 2012-13 (assessment completed in absence of complete information) and consequently, there is no business loss which could be carried forward to current year. Therefore, present case attracts provisions of Explanation 1 of section 271(1)(c) as appellant failed to offer Explanation before AO and whatever Explanation offered during appeal proceedings is not considered correct. The claim of appellant that disallowance of current year / carried forward loss is due to change of opinion is also not accepted as appellant company itself categorized rent amount in previous years as 'income from house property and there is no ambiguity in the issue that when there is no business income in hands of appellant, question of business loss do not arise. Hence claim of appellant is rejected. Consequently, I am of considered view that AO has rightly levied penalty u/s 271(1)(c) of IT Act to the extent of Rs.11,53,973/-, Hence, Grounds of appeal of appellant are Dismissed.”
5. The Assessee, being aggrieved, has challenged the decision of the Ld. Commissioner in confirming the penalty and at the outset submitted that the AO, without waiting for the decision in quantum appeal against the addition of Rs.37,34,542/- by the then Ld. CIT(A) has passed the penalty order and levied the penalty. Even otherwise, the order passed by the then Ld. CIT(A) in the quantum appeal, is an ex-parte order and the appeal of the Assessee has M/s. Jagruti Computech Pvt. Ltd. been dismissed in limine. The Assessee further submitted that even otherwise the assessment proceedings were carried out during Covid-19 period when entire nation was on hold, and therefore the Assessee, could not make effective compliance.
The Ld. D.R. though refuted the claim of the Assessee but not the factual aspects, such as carrying out of the assessment proceedings during the Covid-19 period and passing the assessment order and the penalty order by the AO as ex-parte.
Having heard the parties and perused the material available on record, we observe that the Assessee during the Covid-19 period in the assessment proceedings could not get proper opportunity to represent its case and therefore the issue involved qua levy of penalty also remained to be adjudicated in its right perspective and proper manner. Even otherwise, as demonstrated by the Assessee that order passed by the then Ld. CIT(A) in quantum appeal is also ex-parte and therefore as per Assessee there is every likelihood that the same would entail setting aside. Thus, considering the peculiar facts and circumstances in totality, for the just and proper decision of the case and substantial justice, we are inclined to remand the instant case qua levy of penalty to the file of the AO for decision afresh, suffice to say by affording reasonable opportunity of being heard to the Assessee. Thus, the case is remanded to the file of the AO accordingly.
In the result, the appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 24.02.2025.