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Facts
The assessee, a pilot, did not file an income tax return for AY 2016-17 but did so in response to a notice u/s 148. The AO made additions and initiated penalty proceedings. The assessee appealed the assessment order, which was pending. Subsequently, the AO passed an ex-parte penalty order, which was upheld by the CIT(A)/NFAC.
Held
The Tribunal held that hearing the penalty appeal was premature as the quantum appeal was still pending. Following a High Court precedent, it was decided that penalty orders should be kept in abeyance until the disposal of the quantum appeal. Therefore, the penalty proceedings were set aside to the CIT(A)/NFAC for fresh consideration.
Key Issues
Whether penalty proceedings can be sustained when the related assessment appeal is pending before the appellate authority, and whether the penalty order passed ex-parte without affording opportunity of hearing is valid.
Sections Cited
139, 148, 147, 144B, 80D, 69, 115BBE, 156, 271(1)(c), 271(1)(b), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 27.11.2024 vide DIN & Order No. ITBA/NFAC/S/25/2024-25/1070689919(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2016-17.
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee is working as Pilot in Air India Limited. The assessee did not file his return of Income for the Asst. year 2016-17 u/s 139 of the Act however filed the return of Income in response to Notice u/s 148 of the Act by declaring the total Income of Rs. 37,42,310/- Thereafter the assessment Order u/s 147 read with section 144B of the Act was passed on 22/01/2024 by making the additions/disallowances of Rs.6,31,125/- as detailed below- i) Deduction claimed u/s 80D amounting to Rs.2400/- ii) Rs. 6,28,725/- ( Purchase of Immovable Property Rs.72,83,725/- (-) Home Loan of Rs. 66,55,000/- ) treated as unexplained investment u/s 69 of the Act & taxed u/s 115BBE of the Act. The AO completed the assessment on 22/01/2024 on a Total Income of Rs. 43,73,435/- and raised total demand of Rs.5,43,487/- u/s 156 of the Act. The AO also initiated the penalty proceedings u/s 271(1)(c) of the Act as well as u/s 271(1)(b) of the Act on or before the completion of the assessment proceedings.
3.1 Being aggrieved by the Order of the AO dated 22/01/2024 passed u/s 147 read with section 144B of the Act, the assessee preferred an appeal before the ld JCIT(A)/CIT(A) on 03/07/2024
Page 3 of 5 vide e-filing Acknowledgement No. 567915240030724 which is still pending for disposal.
3.2 During the pendency of the quantum appeal before the ld. JCIT(A)/CIT(A), the AO had passed ex-parte penalty Order u/s 271(1)(C) of the Act on 16/07/2024 by imposing the penalty of Rs.1,95,022/- on the assessee for furnishing inaccurate particulars of income of Rs.6,31,125/-
Being aggrieved by the Order of Penalty dated 16/07/2024 passed u/s 271(1)(C) of the Act, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
4.1 The ld. CIT(A)/NFAC dismiss the appeal of the assessee by observing that the assessee is under a mandatory obligation to disclose all the material facts in the return of income so that the Assessing Officer can arrive at his correct income for the year. Under no circumstances, the assessee is allowed under the Income- tax Act to file inaccurate particulars and present a very different picture than the real One and accordingly the AO is entirely justified in imposing the penalty of Rs. 1,95,022/-
Again aggrieved by the Order dated 27/11/2024 of the ld. CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal. Before us, the assessee has also filed written submission along with the copy of the Order of Hon’ble High Court of Karnataka at Bengaluru dated 14/08/2024 in the case of Anjanadri Fuel Station V. ITO in WP No. 6164 of 2024 (T-IT).
Before us, at the outset, the ld. A.R. of the assessee drew our attention on the Form No.35 along with the Acknowledgement for filing the quantum Appeal before the ld. CIT(A)/NFAC and Page 4 of 5 submitted that the said appeal is still pending before the ld. CIT(A)/NFAC for disposal. Further ld. AR of the assessee relying on the Order of the Hon’ble High Court of Karnataka at Bengaluru dated 14/08/2024 in the case of Anjanadri Fuel Station V. ITO in WP No. 6164 of 2024 (T-IT) prayed that the penalty order may also be remitted back to the file of ld. CIT(A)/NFAC as the quantum appeal is still pending for disposal.
The ld. D.R. on the other hand supported the order of authorities below.
We have heard the rival submissions and perused the material available on record. It is the grievance of the assessee that despite pendency of the quantum appeal before the ld. CIT(A)/NFAC, the Authorities below have proceeded to issue penalty notices and show cause notices followed by the penalty Order/Appellate Order. It is an undisputed fact that the quantum appeal in the case of the assessee for the impugned assessment year is still pending before the ld. CIT(A)/NFAC for disposal. Further, the Hon’ble High Court of Karnataka at Bengaluru vide order dated 14/08/2024 in the case of Anjanadri Fuel Station V. ITO in W.P. No. 6164 of 2024 (T-IT) by relying its own Order in the case of Mr. B.S. Uday Shetty Vs. The Assistant Commissioner of Income Tax- W.P. No. 8585/2022 dated 21/04/2022 has held that where the assessee has file an appeal against the Original Assessment Order, it would be necessary to keep the penalty orders and demand notice in abeyance till disposal of the quantum appeal. Before us also, the ld AR of the assessee fervidly argued that as the quantum appeal is pending before the ld. CIT(A)/NFAC, the issue of penalty may also be remitted back to the file of ld. CIT(A)/NFAC.
Page 5 of 5 8.1 We are also of the considered opinion that if the quantum appeal before the ld. CIT(A)/NFAC is still pending for the disposal, the hearing of the penalty appeal by us at this stage is premature. If an order of assessment or reassessment which forms the basis for the penalty is pending, then the penalty cannot stand by itself and is liable to be set aside. Accordingly, the entire issue of penalty proceeding is also set aside to the file of the ld. CIT(A)/NFAC for fresh consideration in accordance with law. Needless to say a reasonable opportunity of being heard must be granted to the assessee. It is ordered accordingly
In the result, appeal filed by the assessee is partly allowed for statistical purposes.