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Facts
The assessee's appeal is against the order of the CIT(A) which confirmed a penalty imposed by the AO for concealment of income. The AO initiated penalty proceedings under section 271(1)(c) for concealment of income of Rs. 10,79,870/-, and a penalty of Rs. 2,16,240/- was imposed. The assessee unsuccessfully challenged this before the CIT(A).
Held
The Tribunal held that the CIT(A) erred in changing the limb of the penalty from 'concealment' to 'furnishing of inaccurate particulars' without having the power to do so under Section 251 of the Income Tax Act. The CIT(A) cannot enhance or reduce the penalty without giving the assessee an opportunity to show cause, and changing the nature of the penalty was beyond his powers.
Key Issues
Whether the CIT(A) had the power to change the nature of the penalty from concealment to furnishing inaccurate particulars, and whether the order was passed in accordance with Section 251 of the Income Tax Act.
Sections Cited
271(1)(c), 274, 251
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Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’SMC” JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 273/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 11-01-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2010-11 raising therein following grounds of appeal. ‘’1. On the facts and circumstances of the case and in law also ld. Lower Authorities grossly erred in levying and confirming penalty u/s 271(1)© of the Act, 1961 for Rs.2,16,240/-.
MRS. MANJU DEVI AGARWAL VS ITO,WARD 6(2), JAIPUR 2. On the facts and circumstances of the case and in law also in the light of the decision of Hon’ble Supreme Court in the case of Emerald Meadows 242 Taxman 180 (SC) and Hon’ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory 359 ITR 0565 (Kar.), the AO grossly erred in levying the penalty u/s 271(1)© of the Act as also AO did not strike off the inappropriate portion of the notice issued u/s 274 of the Act as it did not specify under which limb of Section271(1)© of the Act penalty proceedings have been initiated i.e. either for concealment of particulars of income or for furnishing of inaccurate particulars of income.’’ 2.1 As per the brief facts of the case are that, while passing the assessment order, penalty proceedings under section 271(1) © of the Income Tax Act were initiated for concealment of income of Rs. 10,79,870/- and in the absence of compliance, penalty order was passed there by imposing penalty of Rs. 2,16,240/- for concealment of her income. Although the order of imposition of penalty was challenged before ld. CIT(A) yet the assessee remained unsuccessful as the appeal filed was dismissed. 2.2 Aggrieved by this order, the Assessee preferred the present appeal before the Bench on the grounds mentioned hereinabove . 2.3 At the very outset, the Ld AR relied upon his application for raising additional ground of appeal. The contents of the application are reproduced below. ‘’That as per Rule 11of the Income Tax (Appellate Tribunal) Rules, 1963, the assessee is requesting your honour to kindly grant leave for raising this additional ground before this Hon’ble Tribunal.
MRS. MANJU DEVI AGARWAL VS ITO,WARD 6(2), JAIPUR ‘’On the facts and circumstances and in law, the ld. CIT(A) grossly erred in changing the limb of the penalty from ‘concealment’ to ‘furnishing of inaccurate particulars’ as there is no power u/s 251 of the Act that allows the ld. CIT(A) to improve the case of the Assessing Officer and that too without complying to Section 251(2) i.e. without providing a reasonable opportunity of showing cause against such enhancement or reduction.’’ It is also submitted that this additional ground is purely a legal ground and therefore, can be raised at any stage of the appellate proceedings as has been held by the Hon’ble Supreme Court. Therefore, it is most humbly prayed that leave may be granted to entertain this additional ground.’’ 2.4 On the country Ld DR contested the above application and submitted that this ground cannot be raised at this stage, as no such ground was ever raised before the revenue authorities. 2.5 I have heard the Counsel for both the parties on this application for raising additional ground and after going through the contents of the application, I found that Assessee has raised legal arguments with regard to the powers conferred upon Ld Commissioner under section 251 of the Income Tax Act and in my view this is purely a legal ground and no documentary evidences are required for adjudicating this ground and assessee or the respondent do not want to lead any other independent witnesses or documentary evidences therefore, considering the principal's laid down by Hon'ble Supreme Court in the case of NTPC, (Supra) I allow this application and admit the additional ground for adjudication.
2.6 Since the additional ground raised by the Assessee is purely a legal ground, therefore I have decided to proceed to adjudicate this ground firstly. 2.7 I have heard the Counsel for both the parties on this ground and I have also perused the documents placed on record, judgement cited before me and the orders passed by the revenue authorities. From the records I found that while passing the assessment order, penalty proceedings under section 271 (1)© of the Income Tax Act were initiated for concealment of income of Rs. 10,79,870/- by the AO and and penalty was imposed for concealment of income by the assessee. Where as in appeal the ld CIT(A) while discussing, concluded that Assessee had not made correct disclosure of all particulars, as the figures of capital gain income in original return and in return filed in response to notice under section 148 is different, which according to ld. CIT (A) proves that Assessee did not accurately furnished particulars in her return of income. Thus ld.CIT(A) has changed the nature of the penalty. Now the moot question for decision before me is that as to whether any power vested with the Commissioner of Appeals as specified under section 251 of the Income Tax Act which empowers him to do so. I am of the view that in order to adjudicate this ground, it is necessary and imperative to analyse the provisions of section 251 of Income Tax Act, which are reproduced below.
MRS. MANJU DEVI AGARWAL VS ITO,WARD 6(2), JAIPUR Section 251. (1) In disposing of an appeal, the 86 [**]Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment 90 91 [***]; 92[ (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;] (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty, (c) in any other case, he may pass such orders in the appeal as he thinks fit, (2) The 93[***] 94[Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation - In disposing of an appeal, the 93[* * *] 94[Commissioner (Appeals)) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 93[* * *] 94 Commissioner (Appeals)] by the appellant.’’ 2.8 After having heard at length and after going through the provisions of law I found that ld CIT(A) in an appeal against an order imposing a penalty can during the appellate proceedings confirm or cancel such order or vary it so well either to MRS. MANJU DEVI AGARWAL VS ITO,WARD 6(2), JAIPUR enhance or to reduce the penalty. As far as the facts of the present case are concerned, Ld CIT (A) has changed the nature of penalty as the AO has held that Assessee has concealed the income but ld CIT(A) concluded that Assessee has filed inaccurate particulars meaning thereby that ld. CIT(A) has varied his order from the order of that of AO. However as per the provisions of section 251 of Income Tax Ac, the ld. CIT(A) can vary but that variation should either enhance or reduce the amount of penalty. However in the present case, such variation on the part of ld. CIT(A) does not either enhance or reduce the penalty. Therefore I am of the considered view that ld.CIT(A) did not have the powers to change the nature of penalty under section 251 of Income Tax Act. Even ld. DR could not point out any provision of Income Tax Act or place on record any judgement which empowers the ld. CIT(A) to change the nature of the penalty. Therefore considering the totality of the facts and circumstances as discussed above, I have no other option except to quash and set aside the order of Ld CIT(A) in confirmming the order of penalty. Thus the penalty in the present case stands deleted. 3.1 Since by the present order I have already deleted the penalty imposed in the presentation case, therefore now there is no need to adjudicate or dispose of other Grounds raised by the assessee.
MRS. MANJU DEVI AGARWAL VS ITO,WARD 6(2), JAIPUR 4. In the result, the appeal filed by the assessee stands party allowed with no orders as to cost. Order pronounced in the open court on 26/09/2024.