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Facts
The assessee claimed write-off of bad debts and had sundry creditors, which the AO added back to income and initiated penalty proceedings. The assessee's appeal against the quantum addition was dismissed, and subsequently, the penalty appeal was also dismissed for non-compliance.
Held
The Tribunal noted the assessee's continuous non-compliance and the dismissal of previous appeals but, in the interest of substantial justice, restored the file to the AO to give one last opportunity to the assessee to explain why the penalty should not be imposed, directing de novo adjudication.
Key Issues
Whether the penalty imposed under Section 271(1)(c) is justified without proper evidence and opportunity to the assessee, and whether the dismissal of the appeal for non-compliance due to an incorrect address vitiates the proceedings.
Sections Cited
271(1)(c), 154, 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2010-11 Shri Rohit Agarwal v. ITO-3(3) Room No.108, 1st Floor Kanpur 49/52, General Ganj Radha Kripa, Kanpur TAN/PAN:ABAPA2045C (Appellant) (Respondent) Appellant by: None Respondent by: Shri Sanjeev Krishna Sharma, D.R. Date of hearing: 08 01 2025 Date of pronouncement: 31 01 2025 O R D E R
This appeal has been preferred by the Assessee against the order dated 19.02.2019, passed by the ld. Commissioner of Income Tax (Appeal)-I, Kanpur (ld. CIT(A)) for Assessment Year 2010-11, wherein he has confirmed imposition of penalty of Rs.1,76,400/- under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter called “the Act’).
The brief facts of the case are that the assessee e-filed his return of income for the year under consideration on 01.10.2010, declaring a total income of Rs.4,98,850/-. The case of the assessee was selected for scrutiny under CASS. During the course of assessment proceedings, it was observed that the assessee had written off bad debts of Rs.2,97,452/-. The assessee was required to explain and justify the claim of write off of such bad debts. As per the Assessing Officer (AO), the assessee could not furnish any satisfactory reply and accordingly the AO made addition on account of bad debts and also initiated penalty proceedings under section 271(1)(c) of the Act. Further, the amount of creditors shown in the Financial Statements of the assessee could also not be verified by the AO and in this regard also the AO made an addition of Rs.2,73,285/- and also initiated penalty proceedings under section 271(1)(c) of the Act on this issue also. The assessment proceedings were completed at an income of Rs.11,19,587/-.
3. The assessee’s appeal against the quantum addition was dismissed by the Ld. First Appellate Authority.
4. During the course of hearing for penalty proceedings under section 271(1)(c) of the Act, the assessee submitted some documents regarding Sundry Creditors but as per the AO, assessee could not furnish any justifiable evidence regarding writing off of bad debts. Accordingly, the AO imposed penalty of Rs.1,76,400/- under section 271(1)(c) of the Act.
5. Aggrieved by the penalty order dated 28.03.2017 of the AO passed under section 271(1)(c) of the Act, the assessee preferred an appeal before the ld. CIT(A), who dismissed the appeal of the assessee for the reason of non-compliance by the Assessee, vide order dated 23.04.2018.
6. Aggrieved by the order dated 23.04.2018, the assessee moved a rectification application under section 154 of the Act before the ld. CIT(A)-I, Kanpur, stating therein that the appeal of the assessee was dismissed by the ld. CIT(A) for the reason of non-appearance and non-compliance to the notice of hearing, which is a mistake on the face of record and need rectification. However, the ld. CIT(A) rejected the application moved by the assessee under section 154 of the Act, vide order dated 19.02.2019, observing as under:
“2. Undersigned has carefully considered the petition of the appellant u/s. 154 of the Act and the contentions therein. The only issue for consideration is whether notice for fixing appeal was served upon the assessee or not.
This office has already adjudicated the appeals of the appellant for assessment year under consideration and it is found that the notice for hearing is generated through ITBA system, at the address provided by the assessee. The office of the undersigned has no choice to change the address. It is also observed that the assessee had sought adjournment request on 06.04.2018 for hearing of appeal fixed for 09.04.2018. It shows that the assessee had received notices issued for hearing of appeal.
4. As the grounds of appeal
are already adjudicated U/s 250(6) of the Act, the same cannot now be adjudicated u/s. 154 of the Act because there is no mistake apparent from record. Appellant has discretion to approach Hon'ble ITAT against the order u/s. 250(6) of the Act passed by this office. Therefore, application u/s. 154 of the Act is rejected and dismissed.”
7. Now, the assessee has approached this Tribunal challenging the dismissal of his appeal by the ld. CIT(A)-I, Kanpur by raising the following grounds of appeal:
1. Learned Assessing officer is not justifying imposing penalty without evidence and penalty imposed on the basis of assumption and guess work, mainly when assesses has given all the information as required by the assessing officer much before the completion of assessment. Learned A.O. has imposed penalty without concrete finding and evidence without giving any opportunity to assessee of being hearing which is against principle of natural justice.
2. Learned AO has ignored the facts and evidence that amount shown as unrecoverable from a Debtor Rajhans Gramoudyog written off in books of account and debited in Rebate and claims of Rs.2,97,452 does not change the basis character of transaction as nothing has been concealed hence penalty provision does not apply and penalty is imposed against law and natural justice.
3. Learned Assessing officer is not justified in treating the reconciliation difference with a creditor Nirma Ltd., principal
and main supplier as concealed income while all the facts and reconciliation statement were submitted before the A.O. during assessment proceedings but he has imposed penalty under 271(1)(c) of the Act, ignoring the vital evidence and supporting documents submitted by assessee is also against natural justice because the same is without any base and completely based on surmise/ guesswork.
That the hon'ble CIT Appeal-1 Kanpur has ignored the vital evidence while rejecting the Penalty appeal was that the assessee has filed the online appeal in Form 35 in which the address stated was 108, First floor, 49/52, Radha Kripa. General Ganj, Kanpur-208001 and the necessary changes were also made in PAN DATA through amendment form before filing of appeal which is clearly reflecting on the site a copy is also enclosed which is self-explanatory. CIT appeal has served the notice of hearing of appeal at the wrong address which does not belong to the assessee. However, the copy of order rejecting the penalty appeal is also showing incorrect address which was received after a long period through new owner of the property and not through I.T. department.
That the assessee has sought adjournment online on the mail id of CIT appeals and as well as on income tax site with the Hon'ble CIT appeal on 6.4.2018 which was well in time while appeal was fixed for 9.4.2018. Hon'ble CIT has not considered adjournment request and letter and order rejecting the appeal is served at the incorrect address which is also mistake on record and self-evidence.
That the assessee has filed application u/s 154 on 1.5.2018 with the CIT Appeal-1, Kanpur and in grievance with Pr.CIT UP and Uttaranchal even than the CIT appeal has ignored the vital evidence and passed order dated 19.2.2019 served on 2.4.2019 that too is showing incorrect address not belonging to the appellant messing up the entire request and left us to request and take shelter of your honour.
That the honorable apex court in the case of Dilip N. Shroff vs. Joint CIT (2007) 291 ITR 519 (SC) has held that if there is no evidence on material to show that the assessee had deliberately furnished inaccurate particulars and there was any mala fide intention on his part so as to make him liable for penalty. A mere omission or negligence would not constitute deliberate act of concealing particulars of income or suppressed or furnished inaccurate particulars of income. Relying upon the above judgments and facts of the case also imposing of the penalty by the AO is against the law of natural justice and should be deleted.
8. That appellant craves, leave to add, alter or modify any of the grounds of appeal at the time of hearing.
None was present for the assessee when the appeal was called out for hearing, nor was any application for adjournment moved in this regard. A perusal of order sheet entries shows that this appeal was registered by the Registry of the ITAT on 03.06.2019 and since then the appeal has been fixed for hearing for as many as 35 times and hearing had to be adjourned on each such occasion either at the request of the assessee or for the simple reason that no one was present on behalf of the assessee to present the case of the assessee. Therefore, in view of continuous non-compliance of the assessee, I have no option but to proceed to adjudicate the appeal ex-parte qua the assessee.
It is seen that the penalty was confirmed for the reason of failure of the assessee to furnish documents regarding bad debts written off and even the documents furnished by the assessee regarding Sundry Creditors were disbelieved by the AO. The assessee’s appeal before the Ld. First Appellate Authority was dismissed for want of prosecution. From the facts of the case and the sequence of events, it is evident that the appeal of the assessee cannot be adjudicated on merits at this stage. Although the assessee has been a chronic defaulter and seems to have taken proceedings before the Tribunal in a casual manner, all the same in the interest of substantial justice, I restore this file to the office of the AO for providing one last opportunity to the assessee to explain before the AO why the penalty under section 271(1)(c) of the Act should not be imposed. Accordingly, the AO is directed to adjudicate the issue of imposition of penalty de novo. I also caution the Assessee to fully comply with the directions of the AO in the set-aside proceedings when called upon to do so, failing which, the AO would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the Assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 31/01/2025.