ELECTRONIC INSTRUMANTATION & CONTROL PRIVATE LIMITED,AHMEDABAD vs. THE ITO, WARD-2(1)(1), (PREVIOUSLY CIRCLE-2(1)(1)), AHMEDABAD

1. That the learned CIT (A) has erred in law and on facts of the case, in dismissing the appeal which is wholly unlawful and against the principles of natural justice and equity. That on the facts and in the circumstances of the case and in law, the learned CIT (A) NFAC, erred in confirming order made u/s. 271 ( 1) ( c) of the Income Tax Act, 1961 which is bad in law, ultra vires and without appreciating the facts, submission and evidences in the proper perspective which, is liable to be annulled.

2. That the CIT(A) has failed to independently apply their mind to the facts of the case and has merely endorsed the conclusions drawn by the AO. The order of the CIT(A) lacks detailed reasoning and appears to have dismissed the appeal without considering submission dated 16.10.2024 of the appellant Therefore, penalty u/s. 271(1) (c) of the income tax act. 1961 is not justified and deserve to be cancelled.

3. That our submission dated 16-10-2024 is not taken into consideration by CIT Appeal. ITAT has deleted the addition of Rs.368810/- vide ITAT order dated 14.10.2019. It is true that Ld. AO discussed the fact of the assessee's case Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 3 in para 3 and 4 of the assessment order and same was confirmed by the CIT (A), but later on ITAT (Ahmedabad) held treating supervision income of Rs.12,18,000/- as income from manufacturing activity for the purpose of computing deduction under section 80IB of the Act and as such addition made is deleted. Copy of ITAT order dated 14.10.2019 was submitted vide our submission dated 16.10.2024. As such there is no difference between assessed income and return income. This submission is fully ignored by CIT Appeal Therefore, penalty u/s. 271(1) (c) of the income tax act. 1961 is not justified and deserve to be cancelled.

4. The appellant craves leave to add, alter or modify the above grounds of appeal at the time of hearing.

5. The Authorized Representative (AR) of the assessee submitted that the Ahmedabad Bench, vide order dated 14.10.2019, held that supervision income of Rs.12,18,000/- was part of the manufacturing activity and therefore eligible for deduction under Section 80-IB and the entire addition was deleted, leading to no difference between returned income and assessed income. The AR also placed a copy of the ITAT order which was also submitted to CIT(A) along with the submission dated 16.10.2024, but it was completely ignored by the CIT(A). The AR argued that since the addition itself has been deleted, the penalty levied on such addition cannot survive. The AR also stated that the CIT(A) failed to apply independent reasoning and merely endorsed the findings of the AO and the assessee’s submission dated 16.10.2024 was completely ignored, which is a serious violation of natural justice.

7.1. The entire reasoning of the CIT(A) is a verbatim reproduction of the Assessing Officer’s findings, without any application of independent judicial mind to the facts of the case. This approach is not only contrary to settled judicial principles but also undermines the role of an appellate authority, whose primary duty is to objectively assess the facts and provide a reasoned decision.

7.2. Most glaringly, the assessee had specifically submitted the ITAT’s order dated 14.10.2019, wherein the very basis of the penalty—the addition of Rs.12,18,000/-—was deleted. Despite this crucial piece of evidence, the CIT(A) chose to completely ignore it and proceeded to confirm the penalty in a perfunctory manner. This conduct is highly arbitrary and in gross violation of the principles of natural justice and disrespect to the orders passed by higher judicial Forums.

7.3. It is well established principle that an order which lacks reasoning and fails to deal with the submissions of the parties is liable to be set aside. Many judicial precedents also held that an appellate authority must pass a reasoned and speaking order considering all the facts on record. The present order of CIT(A) fails to meet this fundamental requirement of adjudication. Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 7.4. This Bench vide order dated 14.10.2019 in had already deleted the quantum addition of Rs.12,18,000/-, which formed the basis for the penalty under Section 271(1)(c) of the Act. This order was placed on record before the CIT(A), yet it was not even acknowledged in the impugned appellate order. It is trite law that when the very foundation of the penalty ceases to exist, the penalty itself cannot survive.

7.5. The manner in which the CIT(A) has handled this case raises serious concerns about the casual and mechanical approach adopted in discharging appellate functions. The CIT(A) is expected to act as an independent quasi- judicial authority and is duty-bound to pass a reasoned and speaking order addressing the contentions of both parties. However, in the present case, he has failed in this fundamental duty. We take strong exception to such an approach and direct that a copy of this order be forwarded to the Pr. Chief Commissioner of Income Tax (Pr. CCIT), Ahmedabad, for appropriate administrative review of such deficient appellate adjudication. Since the quantum addition has been deleted by the ITAT, the penalty under Section 271(1)(c) of the Act does not survive. The CIT(A)’s order is set aside as being perverse, arbitrary, and passed without application of mind. Penalty of Rs.1,13,900/- is deleted.