2015 (7) TMI 329 - AT - Income Tax

Penalty u/s 271(1)(c) - Condonation of delay rejected by CIT(A) and deciding the appeals on merits - Held that - The quasi judicial authorities are being respected not on account of their power to legalise the injustice on technical ground but because, they are capable of removing injustice and is expected to do so. The contention of the assessee is that he being a lay man has handed over the papers to tax consultant who did not file appeals in time. This belief is to be tested on consequential result i.e. by making the appeal time barred what the assessee will achieve. He cannot adopt a dilatory tactics by filing the appeal late because that will ultimately harm him. Therefore, looking to the facts and circumstances and the punishment in the shape of tax liability of ₹ 48,86,903/- including interest as well as penalty of more than ₹ 24 lacs, we are of the view that the punishment is disproportionate to the ultimate negligence of the assessee. Therefore, we condone the delay in filing the appeals before the CIT(A). The assessment order and the penalty order are ex parte orders. The moment, the assessee will file any application for permission to adduce additional evidences then, as per sub-rule -3 of Rule 46A of IT Rules, 1962, the ld. first appellate authority will have to call for a remand report from the AO. The second proceeding would commence at the level of AO. Therefore, with a view to avoid multiple proceedings, we deem it appropriate to set aside the orders of CIT(A) as well as the orders of AO and remit the issues in quantum appeal to the file of AO for re-adjudication. As observed earlier we do not appreciate the conduct of assessee also. He is directed to co-operate with the AO and appear before him. He shall file all necessary details for the assessment of his income. The observations made by us will not impair or injure the case of AO and will not cause any prejudice to the defence/explanation of the assessee. The ld. AO shall provide due opportunity of hearing. As far as penalty appeal is concerned, since we have set aside the assessment order, there are no additions on which it can be alleged that assessee has evaded the taxes. After passing the assessment order, it is for the AO to assess whether penalty proceedings are to be initiated against the assessee or not. This factor would come out after completion of the assessment proceedings. Therefore, the penalty appeal is allowed and the penalty order is quashed. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Delay in filing appeals, assessment order under section 144 r.w.s. 147, penalty order under section 271(1)(c), condonation of delay, best judgment assessment, sufficiency of cause for delay, role of AO in best judgment assessment, proportionality of punishment, setting aside orders for re-adjudication.

Analysis:
1. The appeals were filed against separate orders of assessment and penalty dated 26.12.2013 passed by the CIT(A) in AY 2008-09. The appellant contended that the delay in filing the appeals should have been condoned and the appeals should have been decided on merits.

2. The appellant, engaged in the business of providing security services, failed to file the original return of income as required under section 139(1) of the Income-tax Act. The AO passed the assessment order under section 144 of the Act, determining the taxable income at a certain amount. The appellant filed an appeal which was found to be time-barred by the CIT(A), leading to a request for condonation of delay.

3. The penalty proceedings under section 271(1)(c) were initiated by the AO, imposing a penalty in an ex parte order. The appellant filed an appeal against the penalty order, also seeking condonation of delay. The CIT(A) refused to condone the delay, citing the appellant's negligent conduct before the AO.

4. The Tribunal considered the provisions of section 249 empowering the CIT(A) to admit appeals after the expiry of limitation if sufficient cause is shown. The Tribunal analyzed the best judgment assessment under section 144, emphasizing that the AO must make a fair estimate based on available material. The Tribunal found the punishment disproportionate to the appellant's negligence and condoned the delay in filing the appeals.

5. The Tribunal set aside the orders of the CIT(A) and the AO, remitting the issues in the quantum appeal for re-adjudication. The appellant was directed to cooperate with the AO and provide necessary details for the assessment. The penalty appeal was allowed, and the penalty order was quashed due to the setting aside of the assessment order.

6. Ultimately, both appeals were allowed for statistical purposes, with the Tribunal emphasizing the need for cooperation between the appellant and the AO in the re-adjudication process.

7. The judgment highlighted the importance of procedural fairness, the role of the AO in best judgment assessments, and the need for proportionate punishment in tax matters. The decision aimed to balance the interests of the appellant with the requirements of the law, ensuring a just outcome in the appeals process.