JAGANNATH SAJAN JOTE,AHMEDNAGAR vs. INCOME-TAX OFFICER,

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ITA 2086/PUN/2016Status: DisposedITAT Pune03 August 2018AY 2011-126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided to remand both appeals to the Assessing Officer for fresh adjudication. Regarding the quantum addition (ITA No. 2085/PUN/2016), the Tribunal reasoned that there was no representation before the AO and CIT(A), leading to ex-parte orders. It acknowledged the possibility of documents not being properly defended and potential wrong appreciation of facts in such circumstances. Therefore, the entire appeal was remanded to the AO, who was directed to grant a reasonable opportunity of being heard to the assessee and to consider the requisite documents. The grounds were allowed for statistical purposes. For the penalty issue (ITA No. 2086/PUN/2016), the Tribunal acknowledged the reasonable cause for non-attendance due to the tax consultant's illness and death. However, it also noted the assessee's duty to make alternate arrangements for time-barring matters. Considering both aspects, the Tribunal found it a fit case for an exemplary penalty for default of non-attendance, but directed that the penalty be restricted to one instance (Rs. 10,000/-) and relief granted for the other five instances. The assessee received part relief on this issue. The Tribunal expressly did not decide the merits of the capital gains computation or the full extent of the penalty, opting for a remand and partial relief respectively.

What were the facts?

The assessee, Mr. Jagannath Sajan Kote, filed two appeals for Assessment Year 2011-12. ITA No. 2085/PUN/2016 challenges an order passed by the CIT(A)-2, Pune, under Section 144 of the Income Tax Act, 1961, confirming an addition of Rs. 62,38,108/-. ITA No. 2086/PUN/2016 challenges a penalty order under Section 271(1)(b) of the Act, amounting to Rs. 60,000/-. The Assessing Officer (AO) made an ex-parte assessment after the assessee failed to respond to notices. The AO calculated capital gains based on property sale information and a historical cost of acquisition. The assessee also failed to appear before the CIT(A), leading to an ex-parte appellate order confirming the AO's additions and penalty. The assessee's representative argued that the non-compliance was due to the illness and eventual death of their tax consultant.

What were the issues?

1. Whether the addition of Rs. 62,38,108/- on account of Long Term Capital Gain, confirmed by the CIT(A) under Section 144, is legally sustainable, considering the assessee's grounds regarding the cost of acquisition and the failure to refer the matter to the Valuation Officer? (Question of law and fact, turning on Section 144 and principles of natural justice). 2. Whether the penalty of Rs. 60,000/- levied under Section 271(1)(b) for non-compliance with notices is justified, or if there was a reasonable cause for the default? (Question of law and fact, turning on Section 271(1)(b)). Assessee's contentions: - The cost of acquisition adopted by the AO was incorrect, and the valuation report was not properly appreciated. The cost should have been Rs. 12,72,000/- per hectare instead of Rs. 1,27,200/-. The matter should have been referred to the Valuation Officer. - Non-attendance before the AO and CIT(A) was due to reasonable cause, specifically the illness and subsequent death of their tax consultant, and irregular attendance of the consultant. The penalty should be restricted to Rs. 10,000/- for the first default. Revenue's contentions: - The assessee did not attend to statutory notices and did not cooperate at all, either before the AO or the CIT(A). The orders of the AO and CIT(A) on both the quantum addition and the penalty should be confirmed.

Which sections of the Income-tax Act were involved?

Section 144,Section 271(1)(b),Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM

For Appellant: Shri Kishor Phadke
For Respondent: Dr. Vivek Aggarwal
Hearing: 25.07.2018Pronounced: 03.08.2018

आदेश / ORDER

PER D. KARUNAKARA RAO, AM

There are two appeals filed by the assessee under consideration involving A.Y. 2011-12. ITA No.2085/PUN/2016 is filed by the assessee against the order passed by the CIT(A)-2, Pune, dated 25-05-2016 u/s.144 of the Act; whereas the ITA No.2086/PUN/2016 filed by the assessee is against the order passed by CIT(A)-2, Pune, dated 11-05-2016 u/s.271(1)(b) of the Act.

2 ITA Nos.2085 & 2086/PUN/2016 Jagannath Sajan Kote

We shall first take up the appeal ITA No.2085/PUN/2016 of the

assessee

ITA No.2085/PUN/2016 – Order u/s.143(3) of the Act. A.Y. 2011-12

2.

Facts of the case in brief are that the assessee is an individual and

filed the return of income on 31-02-2012 declaring loss of Rs.33,920/-.

AO issued various notice u/s.143(2) of the Act on various dates for which

there was no response. Based on the information provided by the

assessee, bank statement from Axis Bank and the information obtained

from the office of Sub-Registrar, Rahata, the AO observed that the

assessee sold the property situated at S.No.137/5, Shirdi, admeasuring 1

Hector and 6R for a consideration of Rs.90,10,000/-. It was also noted

that assessee was holding 1 hector and 34R of agricultural land and did

not report any income from the same. On getting the information on a

sale instance of an Agricultural land at Shirdi for the year 1981/1982, the

AO arrived at the cost of acquisition of Rs.1,20,000/- per hector of the

assessee for computation of capital gains. Accordingly, the AO worked

out the capital gain at Rs.62,38,108/-.

Further, the AO levied the penalty u/s.271(1)(b) of the Act at

Rs.60,000/- for 6 instances, i.e. @10,000/- for each of the instance.

Eventually, the AO passed an exparte assessment u/s.144 of the Act on

14-03-2014 and made addition of Rs.62,38,108/-.

3.

During the First Appellate proceedings also, the assessee remained

absent despite issue of notice u/s.250 of the Act. Hence the CIT(A) also

passed an exparte order on 25-05-2016 confirming the addition made by

the AO. CIT(A) also confirmed the said penalty levied u/s.271(1)(b) of the

Act by the AO too.

3 ITA Nos.2085 & 2086/PUN/2016 Jagannath Sajan Kote

4.

Aggrieved with the orders of CIT(A) the assessee filed the present

appeals before the Tribunal with the following grounds :

Grounds in respect of quantum addition :

“1. The Ld.CIT(A)-2, Pune erred in law and on facts in confirming the addition made by the Ld. ITO, Ward-1, Ahmednagar (hereinafter referred to as the Ld.AO) amounting to Rs.62,38,110/- on account of Long Term Capital Gain.

2.

The Ld.CIT(a)-2, Pune and the Ld. AO erred in law and on facts in considering the cost of acquisition as on 01-04-1981 as Rs.1,27,200/- instead of Rs.12,72,000/- as determined by the Government Approved Valuer.

3.

Alternatively and without prejudice to the above grounds, the Ld.CIT(A)-2, Pune and the Ld. AO erred in law and on facts in not referring to the matter to the valuation officer.

4.

The appellant craves, leave to add/modify/delete all or any of the grounds of appeal.”

Grounds in respect of penalty u/s.271(1)(b) of the Act :

“1. The Ld.CIT(A)-2, Pune erred in law and on facts in confirming the penalty levied u/s.271(1)(b) of the ITA, 1961 by the Ld. ITO, Ward-1, Ahmednagar (hereinafter referred to as the Ld. AO) amounting to Rs.60,000/-. Appellant could not make effective compliance before the Ld. AO due to reasonable cause.

2.

Alternatively and without prejudice to above grounds, the Ld.CIT(A)- 2, Pune and the Ld. AO erred in law and on facts in not restricting the penalty imposed u/s.271(1)(b) of the ITA, 1961 to the first default only, i.e. upto Rs.10,000/-.

3.

The appellant craves, leave to add/modify/delete all or any of the grounds of appeal.”

5.

Before us, at the outset, Ld. Counsel for the assessee submitted

that the Tax consultant of the assessee who was looking after the Tax

matters of the assessee was sick and eventually expired on 27-06-2017.

Ld. Counsel filed the Death Certificate issued by the Municipal

Corporation, Ahmednagar on 11-07-2017. Further, Ld. Counsel

submitted that there is irregular attendance of the tax consultant to the

assessee’s tax matters over the period of time, which led to non-

attendance before the assessment as well as appellate proceedings.

4 ITA Nos.2085 & 2086/PUN/2016 Jagannath Sajan Kote

Further, on merits, he submitted that the cost of acquisition adopted by

the AO is unfair as the valuation report of the assessee was not properly

appreciated by the authorities. Asking for one more opportunity, Ld.

Counsel made a statement at Bar that he shall appear before the

authorities without fail with documents necessary for passing of the

proper assessment.

6.

On the issue of levy of penalty u/s.271(1)(b) of the Act, Ld. Counsel

for the assessee submitted that non-attendance before the authorities is

not willful and the same is attributable to the bonafide reasons.

Therefore, Ld. Counsel requested for cancelling the penalty considering

the reasonable cause of the ill-health of the then tax consultant.

7.

Ld. DR for the Revenue submitted that the assessee did not attend

to the statutory notices issued by the Department either before the AO or

before the CIT(A) and did not cooperate at all. Considering the assessee’s

conduct and the details available on record, Ld. DR prayed for confirming

the orders of AO/CIT(A) on both the quantum addition as well as on the

penalty issue.

8.

We heard both the sides and perused the exparte orders of the

Revenue, i.e. AO and the CIT(A) as well as the papers filed before us. We

also noticed the revised Form No.36 filed by the assessee after removal of

the defects. Assessee also filed copies of the valuation report which was

submitted already before the CIT(A).

Regarding the quantum addition of Rs.62,38,108/-, we are of the

opinion that this appeal should be remanded to the file of AO for fresh

adjudication. Reasons include (1) there is no representation before the

AO as well as CIT(A) and the authorities had to complete the proceedings

5 ITA Nos.2085 & 2086/PUN/2016 Jagannath Sajan Kote

in time as they are time barring; (2) when exparte orders are made, it is

possible that the documents furnished by the assessee could not be

properly defended before the AO/CIT(A); and (3) there is possibility of

wrong appreciation of facts generally in any case, when there is no

representation by the assessee or his representative. Therefore, the entire

appeal along with the issues raised therein stands now remanded to the

file of AO fresh adjudication. It goes without saying that AO shall grant

reasonable opportunity of being heard to the assessee in accordance with

the set principles of natural justice. Assessee is also directed to present

before the AO and file the requisite documents relating to the said capital

gains. Accordingly, the grounds raised by the assessee are allowed for

statistical purposes.

9.

In the result, the appeal of the assessee is allowed for statistical

purposes.

ITA No.2086/PUN/2016 – Penalty u/s.271(1)(b) of the Act. A.Y. 2011-12

10.

This appeal relates to the penalty levied by the AO u/s.271(1)(b) of

the Act on the quantum addition made by the AO. The facts of the

quantum addition are already in the preceding paragraphs.

11.

After hearing both the sides, we find it is undisputed fact that the

tax consultant who was handling the matters was suffering from illness

over the period of time and he ultimately passed away in the year 2017.

Considering the same, we are of the opinion that assessee has a

reasonable cause, in principle. However, it is the duty of the assessee to

make an alternate arrangement when the time barring matters are

involved. The duty is cast on the assessee to discharge the same. On

considering the failure of the assessee on one side and at the same time,

6 ITA Nos.2085 & 2086/PUN/2016 Jagannath Sajan Kote

the AO’s duty of making assessment on the other side, we find this is a fit case for levy of an exemplary penalty for default of non-attendance before the AO. Therefore, we are of the opinion that the penalty should be restricted to one instance or default and grant relief in respect of the other five instances. Thus, the AO is directed to restrict the penalty to Rs.10,000/- for one instance only. The assessee gets part relief on this penalty issue. Accordingly, the grounds raised by the assessee are partly allowed.

12.

In the result, the appeal of the assessee is partly allowed.

13.

To sum up, ITA No.2085/PUN/2016 filed by the assessee is allowed for statistical purposes and ITA No.2086/PUN/2016 filed by the assessee is partly allowed.

Order pronounced on 03rd day of August, 2018. Sd/- Sd/-

(िवकास अव थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER पुणे / Pune; िदनांक / Dated : 03rd August, 2018. Satish

आदेश की 'ितिलिप अ)ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��थ� / The Respondent. 2. 3. The CIT(Appeals)-2, Pune 4. The Pr.CIT-1, Pune 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब"च, पुणे / DR, ITAT, “B” Bench, Pune. गाड% फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune

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