Loading judgment…
Facts
The assessee's income tax return for AY 2021-22 was selected for scrutiny regarding substantial purchases. The AO completed assessment under Section 143(3) read with Section 144B, making additions including disallowance of purchases, and subsequently levied a penalty of Rs.16,70,12,560/- under Section 271AAD for alleged false entries. The CIT(A) dismissed the assessee's penalty appeal ex-parte due to non-submission of evidence, confirming the penalty, while the assessee's quantum appeal against the additions remained pending.
Held
The Tribunal noted that the CIT(A) decided the penalty appeal ex-parte before the related quantum appeal was adjudicated. In the interest of justice, the Tribunal set aside the matter and remanded it back to the CIT(A). The CIT(A) is directed to decide the present penalty appeal afresh only after the disposal of the quantum appeal, providing due opportunity of hearing to the assessee.
Key Issues
Whether the CIT(A) was justified in confirming a penalty under Section 271AAD ex-parte when the underlying quantum appeal, which formed the basis of the penalty, was still pending adjudication before the same authority.
Sections Cited
271AAD, 143(3), 144B, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 28.05.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] whereby he confirmed the penalty of Rs.16,70,12,560/- levied by the Ld. Assessing Officer (“AO”) u/s 271AAD of the Income Tax Act, 1961 (the “Act”) pertaining to Assessment Year (“AY”) 2021-22.
The assessee has raised the following grounds of appeal :-
1. On the facts and circumstances of the case and in law the CIT(A), NFAC, erred in confirming the levy of penalty by the AO, NaFAC, u/s 271AAD on the allegation of false entries' in the books in respect of certain purchases made by the appellant during the year, not accepting his submission in this respect and without even his first appeal on the quantum addition having been decided. The appellant prays that the AO be directed to delete the penalty. The appellant craves leave to add to, amend, alter, modify or delete any of the grounds of appeal before or at the time of hearing.”
3. Briefly stated, the facts of the case are that the assessee is an individual. He filed his return of income for AY 2021-22 on 14.03.2021 declaring total income of Rs.14,04,280/-. The case of the assessee was selected for scrutiny under CASS to verify the issue of substantial purchases made during the relevant AY under consideration from suppliers who are either non filers or have filed non-business ITR or reflected a substantially lower turnover in their ITR. The assessment was completed by the Ld. AO u/s 143(3) r.w.s. 144B of the Act assessing the income at Rs.17,00,63,492/- vide his order dated 23.12.2022 by making addition to the income of Rs.14,04,280/- returned by the assessee totaling to Rs.16,86,59,212/- comprising of – (i) disallowance of purchases amounting to Rs.16,70,12,650/-; (ii) addition towards unsecured loans u/s 68 amounting to Rs.12,49,500/-; (iii) disallowance of carriage outward expenses amounting to Rs.3,86,322/- and (iv) disallowance of interest expenses amounting to Rs.10,740/-. Penalty proceedings were thereafter initiated by issue of show cause notice dated 23.12.2022 which was duly served upon the assessee as per the provisions of section 271AAD(1) of the Act alleging that there were false entries of Rs.16,70,12,560/- in the books of account of the assessee as there were no actual supply or receipts of goods against the alleged entries. Several notices were issued by the Ld. AO during the course of penalty proceedings, however, the assessee failed to comply to the said notice(s) which led to completion of ex-parte assessment by the Ld. AO levying penalty of Rs.16,70,12,560/- u/s 271AAD of the Act.
4. Aggrieved, the assessee went in appeal before the Ld. CIT(A) challenging the penalty imposed by the Ld. AO. The Ld. CIT(A) dismissed the appeal of the assessee on account of assessee’s failure to file any written submissions and cogent evidence in support of its grounds of penalty appeal. Since, the findings of the Ld. AO remained uncontroverted by the assessee, the Ld. CIT(A) passed an ex-parte order without going into the merits of the case confirming the penalty of Rs.16,70,12,560/- u/s 271AAD of the Act.
Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
6. At the outset, the Ld. AR for the assessee submitted that the assessee’s quantum appeal against the order of the Ld. AO passed u/s 143(3) r.w.s. 144B of the Act, dated 23.12.2022 is pending for adjudication before the Ld. CIT(A). The Ld. CIT(A) has disposed of the penalty appeal of the assessee ex-parte before disposing of the quantum appeal. The Ld. CIT(A) is therefore not justified in deciding the impugned penalty appeal confirming the action of the Ld. AO. He, therefore, urged that the matter be set aside to the file of the Ld. CIT(A) to decide the present appeal afresh on merits once the quantum appeal is decided after affording due opportunity of hearing to the assessee.
The Ld. DR had no objection to the above proposition of the Ld. AR.
We have heard the Ld. Representatives of the parties and perused the material on record. The facts are not in dispute. The Ld. AR has submitted that the assessee has challenged the quantum addition made by the Ld. AO on account of bogus purchases before the Ld. CIT(A) which is still pending for disposal to date. We observe that the Ld. CIT(A) has passed an ex-parte order confirming the penalty levied by the Ld. AO for the reason that the assessee failed to respond to the notice(s) of hearing and file any written submissions/evidence in support of its claim to substantiate its case before the Ld. CIT(A). Considering the totality of the facts and in the circumstances of the case enumerated above, we deem it fit, in the interest of justice and fair play to set aside the matter back to the file of the Ld. CIT(A) with a direction to decide the present appeal once the quantum appeal of the assessee is disposed of after giving due opportunity of hearing to the assessee. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 19th March, 2025.
Sd/- Sd/- (R.K. Panda) (Astha Chandra) JUDICIAL MEMBER VICE PRESIDENT पुणे / Pune; दिन ांक / Dated : 19th March, 2025. रदि आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “ए” बेंच, 4. पुणे / DR, ITAT, “A” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER,
िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune