2018 (3) TMI 1591 - HC - Income Tax

Penalty u/s 271(1)(c) - Held that - The assessee, after service of notice u/s 271(1)(c) upon him, never objected to it alleging non application of mind by the AO and did not raise any question, going to its root, at the earliest or even before the Commissioner of Income Tax (Appeal). Even before ITAT while opposing the order, no such effort was made and orally the contentions based upon omission to strike down some part or portion in notice, not applicable in the matter, were raised. Thus, the fact that such an objection which should have been raised at the earliest, was not raised before the authority imposing penalty or then before CIT (A) or then in appeal memo, is lost sight of. The impact of failure to raise it so , is also not evaluated. The question whether such a ground needed to be taken at the first available opportunity, the impact of failure to so raise it, therefore, need to be answered in present matter. The perusal of order passed by the I.T.A.T. does not show consideration of this aspect. The other contentions which pertain to merits of the matter, therefore, need not be gone into and cannot be gone into by this Court in present appeal. In present facts when the I.T.A.T. has not looked into the effect of omission to raise such a contention at the first available opportunity, we are inclined to answer the question in favour of the revenue. Accordingly, we quash and set aside the order dated 30.06.2017 and restore Appeal back to file of I.T.A.T., Nagpur, for its fresh consideration in accordance with law. We give liberty to the respondent assessee to raise his contentions on legality of notice under Section 271(1)(c) of the Income Tax Act by adding appropriate ground and grant liberty to the department to raise appropriate challenge thereto.

Summary

Issues:
1. Jurisdiction of ITAT to entertain a ground by oral submission without specific ground raised.
2. Propriety and power of ITAT to examine grounds raised orally for the first time.
3. Impact of failure to raise a ground at the first available opportunity.

Analysis:

Issue 1: Jurisdiction of ITAT
The appellant challenged the ITAT's decision to entertain a ground by oral submission without any specific ground raised previously. The appellant argued that the ITAT did not give the revenue an opportunity to respond to the new ground, which was not raised before the assessing officer or CIT(A). The appellant relied on Rule 27 and contended that allowing oral submissions without proper challenge by the revenue was improper.

Issue 2: Propriety and Power of ITAT
The primary question before the court was the propriety and power of the ITAT to examine grounds raised orally for the first time. The court referred to various judgments, including the National Thermal Power Co. Ltd. case, emphasizing the wide powers of the ITAT to consider questions of law arising in assessment proceedings, even if not raised earlier. The court highlighted that both the assessee and the department have the right to file appeals or cross-objections before the ITAT, allowing for the consideration of new legal issues.

Issue 3: Impact of Failure to Raise a Ground
The court noted that the ITAT did not evaluate the impact of the failure to raise a specific contention at the first available opportunity. It was emphasized that the failure to raise such an objection early on was not considered, and its consequences were not assessed. The court concluded that the ITAT's failure to address this aspect warranted the decision to quash the previous order and remand the case for fresh consideration, allowing both parties to raise appropriate grounds.

In conclusion, the court allowed the Income Tax Appeal, setting aside the previous order and returning the case to the ITAT for reconsideration in accordance with the law. The judgment highlighted the importance of raising relevant grounds at the earliest opportunity and ensuring a fair opportunity for all parties to present their arguments.