2016 (1) TMI 1204 - AT - Income Tax

Penalty under section 271(1)(c) -assessment order passed under section 144 - Held that - Undisputedly, assessment in the case of assessee was completed under section 144 of the Act. It is also evident that the additions / disallowances made by the Assessing Officer are either on estimate basis or for the reason that supporting evidences are not available. The learned Commissioner (Appeals) has also confirmed the additions / disallowances more or less accepting the reasoning of the Assessing Officer by observing that assessee has not produced any evidence to support its claim. As far as the addition as unexplained investment on account of introduction of capital by the partner, the assessee, at this stage, has produced certain documents by way of additional evidence to demonstrate that the partners are having sufficient source to introduce the capital. Similarly, assessee has produced details of property tax in respect of rental income. We further find on a perusal of the order of the learned Commissioner (Appeals) that he has not at all considered the written submissions claimed to have been filed by the assessee, a copy of which has been submitted before us by way of additional evidences. Therefore, considering the fact that the assessment was completed under section 144 of the Act making certain additions / disallowances and at this stage the assessee has produced additional evidences which are not before the Departmental Authorities, we are of the view that matter requires to be set aside / restored back to the file of the Assessing Officer for denovo assessment on all the issues after considering the additional evidence filed by the assessee along with other evidences as may be available on record.

Summary

Issues:
1. Delay in filing the appeal in ITA no.7524/Mum./2011.
2. Disallowance and additions made by the Assessing Officer.
3. Imposition of penalty under section 271(1)(c) of the Income Tax Act.

Issue 1: Delay in filing the appeal in ITA no.7524/Mum./2011:
The appeal faced a delay of 360 days due to a change in the partnership firm's constitution, resulting in a dispute between continuing and retired partners. The delay was condoned by the ITAT as genuine reasons were presented, allowing the appeal to be admitted for hearing on merit.

Issue 2: Disallowance and additions made by the Assessing Officer:
The Assessing Officer completed the assessment under section 144 of the Act, adding amounts under section 69 and estimating profit on the sale of property and rental income. The learned Commissioner (Appeals) upheld these additions, stating the assessee failed to substantiate its claims. The ITAT found that the disallowances/additions were made due to the lack of supporting evidence. The ITAT directed the matter to be sent back to the Assessing Officer for a denovo assessment considering additional evidence provided by the assessee.

Issue 3: Imposition of penalty under section 271(1)(c) of the Income Tax Act:
The penalty imposed under section 271(1)(c) was challenged in ITA no.7309/Mum./2011. Since the matter was sent back for denovo assessment, the basis for the penalty no longer existed. Therefore, the ITAT set aside the penalty and allowed the appeal. The ITAT clarified that the Assessing Officer could initiate penalty proceedings if necessary after the completion of the assessment.

In conclusion, the ITAT allowed the appeal in ITA no.7524/Mum./2011 for statistical purposes, directing a denovo assessment by the Assessing Officer. Additionally, the ITAT allowed the appeal in ITA no.7309/Mum./2011 by setting aside the penalty under section 271(1)(c) due to the restoration of the matter for reassessment.