ITAT Indore Judgments — October 2024

The Tribunal acknowledged the substantial delay but considered the reasons provided, including the FIRs, suspension of the management, and the subsequent quashing of FIRs and restoration of the committee, as preventing the assessee from timely filing. It noted that the delay was not due to malafide intent. The Tribunal also considered the principle of liberal interpretation for condoning delay.

The Tribunal condoned the delay, holding that the assessee had sufficient cause. The primary issue was whether the penalty orders were barred by limitation under section 275(1)(c). The Tribunal analyzed various case laws and concluded that the starting point for limitation should be the date of the AO's reference/recommendation to the Competent Officer for initiating penalty proceedings, not the date of the show-cause notice.

The Tribunal observed that while the notices for reassessment and regular assessment were issued to the deceased person before his death, and thus proceedings could be continued against the legal heir under Section 159(2)(a) of the Income Tax Act, passing the assessment order in the name of the deceased person, despite prior intimation of death, was an irregularity rather than an invalidity. The Tribunal relied on judicial pronouncements that there is no statutory obligation for legal heirs to intimate the death of the assessee.

The Tribunal held that the PCIT erred in invoking Section 263 when the issue of unsecured loan was already pending before the CIT(A). The Tribunal noted that the loan transaction was conducted through banking channels and supported by documentation, and that the assessee's appeal against the AO's addition was already pending.

The Tribunal noted that these issues are recurring and have been settled in favour of the assessee by previous ITAT orders. The AR submitted that the issues are identical to those dealt with in earlier years, and there has been no change in facts or law. The Tribunal found no reason to deviate from the earlier decisions.

The CIT(A) enhanced the assessment without issuing a show cause notice to the assessee, which is a mandatory procedural requirement under Section 251(2) of the Act. This procedural lapse makes the enhancement unsustainable.

The Tribunal held that the PCIT erred in invoking section 263 for the issue of accommodation entries from M/s Orange Mist Production Pvt. Ltd as this was not a subject matter of the assessment order under revision. Furthermore, for both issues, the Tribunal found that the Assessing Officer (AO) had not made an addition in the reassessment order as the assessee had provided explanations and the AO was satisfied. The PCIT failed to bring any material on record to substantiate the allegations of accommodation entries.

The Tribunal condoned the 39-day delay in filing the appeal before the CIT(A) considering the assessee's health problems, the COVID-19 pandemic, and the subsequent submission of medical records and affidavit. The Tribunal also noted that the original assessment order was ex-parte under Section 144 of the Act and the CIT(A) had not decided the appeal on merits.

The Tribunal held that the addition was made based on deeming provisions of Section 50C and an expert estimation by the DVO, not on any proven concealment or furnishing of inaccurate particulars by the assessee. Relying on precedent, the Tribunal noted that the Revenue failed to establish that the assessee actually received more than the declared consideration.

The Tribunal noted that the CBDT extended the deadline for applying for regular approval u/s 80G(5) to 30.06.2024, and the assessee filed their application within this extended period. The CIT's order was passed before this extension was made available.

The Tribunal held that the CIT(A) erred in passing the order without allowing the assessee an opportunity for hearing and without considering the merits of the case, dismissing the appeal for want of prosecution. The Tribunal also noted that the CIT(A) confirmed the addition without rejecting the books of account and invoking Section 145(3).

The Tribunal noted that the assessee alleged fraud by the POA holder and had filed a suit to quash the sale deed, which was pending. The Revenue suggested restoring the matter to the AO for adjudication after the outcome of the civil court's decision. Both parties agreed to this course of action.

The Tribunal held that the imposition of penalty under Section 271AAC(1) is not compulsory, as indicated by the word 'may'. The AO has discretion in imposing such penalties. Therefore, the AO's failure to initiate penalty proceedings was not an error. The PCIT's revision order, based on this premise, was considered erroneous.