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Facts
The assessee's case for AY 2019-20 was selected for scrutiny, leading to an ex parte assessment by the AO who added Rs. 4,19,71,070/- received as interest under Section 28 of the Land Acquisition Act, denying exemption under Section 10(37) and relief under Section 57(iv). The assessee contended that notices were not received due to a wrong address, resulting in non-compliance at both assessment and first appellate stages, both of which proceeded ex parte and confirmed the additions and penalty under Section 270A.
Held
The Tribunal found that the assessee was not afforded a proper opportunity of hearing at either the assessment or first appellate stage due to notices being sent to an incorrect address. Consequently, the Tribunal set aside the orders of the first appellate authority for both the quantum appeal (ITA No. 3697/Del/2023) and the penalty appeal (ITA No. 3696/Del/2023), remanding the issues to the Assessing Officer for de novo adjudication. The penalty imposed under Section 270A was deleted, with the possibility of fresh initiation based on the outcome of the quantum proceedings.
Key Issues
Whether the ex parte assessment and first appellate order were valid given the assessee's claim of non-receipt of notices due to an incorrect address, and consequently, whether the additions for interest on enhanced compensation and penalty under Section 270A were justified.
Sections Cited
270A, 144, 28, 10(37), 57(iv), 142(1), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & SHRI M. BALAGANESH
ORDER PER SAKTIJIT DEY, VICE-PRESIDENT
Captioned appeals by the assessee arise out of two separate orders passed by National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2019-20. While is against confirmation of penalty imposed under section 270A of the Income-tax Act, 1961 (in short ‘the Act’), is a quantum appeal. & 3696/Del/2023 AY: 2019-20 ITA No.3697/Del/2023 (Quantum Appeal)
Grounds raised by the assessee are as under:
“On the facts and in the circumstances of the case and in law the Ld. CIT(A) at NFAC, Delhi erred in - i. dismissing appeal against order passed u/s 144 of the I.T. Act, 1961 without providing due and adequate opportunity of hearing: ii. confirming following additions made to the returned income - a. Rs. 4,19.71,070/-on account of interest u/s 28 of the land acquisition Act, received as part of enhanced compensation on compulsory acquisition of his agricultural land denying exemption due u/s 10(37) of the Act: b. without prejudice to the foregoing the act of charging to tax a sum of Rs. 4,19,71,070/- on account of interest u/s 28 of the land acquisition Act. received as part of enhanced compensation on compulsory acquisition of his agricultural land without allowing the relief due u/s 57 (iv) of the Act: c. Rs.1,50,000/- on account of deduction claimed under chapter-VIA;
The above actions being arbitrary, fallacious, unwarranted and illegal must be quashed with directions for appropriate relief.”
Briefly the facts are, the assessee is a resident individual.
For the assessment year under dispute, the assessee had filed his return of income on 16.03.2020 declaring taxable income of Rs.12,40,347/- and exempt income of Rs.4,19,71,070/-. The assessee also claimed refund of Rs.40,73,490/- out of the Tax 2 | P a g e & 3696/Del/2023 AY: 2019-20 Deducted at Source (TDS). Assessee’s case was selected for complete scrutiny to examine claim of refund coupled with disclosure of substantially lower receipts in return, vis-à-vis, 26AS. It is alleged by the Assessing Officer that various statutory notices issued to the assessee under sections 142(1), 143(2) and 144 of the Act were not complied with. Alleging failure on the part of the assessee to respond to the statutory notices, the Assessing Officer proceeded to complete the assessment ex parte to the best of his judgment. While doing so, he added back the interest received from Land Acquisition Officer, amounting to Rs.4,19,71,070/-. Against the assessment order so passed, the assessee preferred an appeal before the first appellate authority.
Alleging non-response of the assessee to the various hearing notices stated to have been issued, the first appellate authority proceeded to dispose of the appeal ex parte. While doing so, he confirmed the addition made by the Assessing Officer.
Sh. K. Sampath, learned counsel appearing for the assessee submitted before us that neither in course of assessment proceedings nor first appellate proceedings, the assessee had ever received any of the notices alleged to have been issued to the & 3696/Del/2023 AY: 2019-20 assessee. Proceeding further, he submitted, since the notices were sent to a wrong/invalid address, the assessee never received them. Hence, he could not comply. Thus, he submitted, the issues arising in the appeal may be restored back to the Assessing Officer for fresh adjudication.
Learned Departmental Representative, though, relied upon the observations of the Assessing Officer and the first appellate authority, however, he did not object to restoration of issues to the Assessing Officer for de novo adjudication.
Having considered rival submissions, we find, it is a fact that both the assessment as well as the first appellate proceedings were decided ex parte qua the assessee on the allegation that the assessee never complied with the multiple notices issued to him.
However, from the submissions of learned counsel appearing for the assessee, prima facie, it appears that notices were not sent to proper address of the assessee. That could be the reason for non- compliance from assessee’s side. Since, the assessee did not get a proper opportunity to represent his case either at the assessment stage or even at the first appellate stage, we are inclined to set aside the impugned order of the first appellate authority and & 3696/Del/2023 AY: 2019-20 restore the issues arising in the appeal to the file of the Assessing Officer for de novo adjudication, after proving adequate opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.
In the result, appeal is allowed for statistical purposes.
We have heard the parties and perused the materials on record. Based on the addition made in the assessment order, which got subsequently confirmed by the first appellate authority, the Assessing Officer initiated proceedings for imposition of penalty under section 270A of the Act. Alleging non-compliance of the assessee to the show-cause notices, the Assessing Officer proceeded to impose penalty under section 270A of the Act, which was confirmed by the first appellate authority.
Having heard the parties, we find the penalty proceedings before the Assessing Officer and the first appellate authority were completed ex parte. The reason for non-appearance of the assessee has already been dealt with by us, while deciding the quantum appeal in the earlier part of the order. Since, we have set aside the order of the first appellate authority in the quantum & 3696/Del/2023 AY: 2019-20 proceedings and restored the issues arising therein to the file of the Assessing Officer for de novo adjudication; the addition made by the Assessing Officer does not survive. Hence, the penalty imposed, based on such addition, cannot survive.
In view of the aforesaid, we are inclined to set aside the impugned order of the first appellate authority and delete the penalty imposed under section 270A of the Act. The Assessing Officer, if warranted, may initiate the proceeding under section 270A of the Act afresh, depending upon the outcome of the quantum proceedings.
In the result, appeal is allowed.
To sum up, the appeal in is allowed and is allowed for statistical purposes.
Order pronounced in the open court on 5th July, 2024