2022 (9) TMI 84 - AT - Income Tax

Penalty u/s 271(1)(c) - Non-consideration of reply filed by the assessee - AO in his penalty order stated that nobody has attended in response to the penalty notice nor given any written submissions - Allegation of violation of principle of natural justice and non-application of mind by the AO - HELD THAT - AO by levying penalty order has categorically held that nobody has attended during the hearing or given any written submissions in reply to show cause notice issued under section 271(1)(c) - Whereas the CIT(A) has extracted the reply dated 21.3.2013 given by the assessee in his impugned order. Thus, the order levying penalty suffers from violation of principle of natural justice and non-application of mind by the AO and the same cannot be allowed to stand. The AO has not exercised his power to levy penalty in a fair, reasonable and judicial manner. Therefore, penalty levied by the AO without considering the assessee s explanation is bad in law and hereby quashed. Thus, the ground raised by the assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealing particulars of income.

Detailed Analysis:

1. Background and Assessment Process:
The appeal was filed against the penalty order dated 18.8.2015 by the Commissioner of Income-tax (Appeals)-3, Ahmedabad, confirming the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2000-01. The assessee, engaged in the business of manufacturing and sale of bright bars, declared a loss of Rs.1,16,30,000/- in the return of income for the said year. The assessment under section 143(3) was completed by the Assessing Officer (AO) making certain disallowances, resulting in a net loss. Subsequently, penalty proceedings were initiated under section 271(1)(c) for concealing income particulars, based on discrepancies found during a survey action under section 133A.

2. Penalty Imposition and Appeal:
The AO imposed the penalty as the assessee did not contest the additions confirmed by the ITAT in a previous order. The CIT(A) upheld the penalty, stating that the assessee's written reply was already considered during the quantum appeal process. The assessee, aggrieved by this decision, approached the Tribunal challenging the penalty imposition.

3. Tribunal's Decision:
During the Tribunal hearing, the assessee did not appear, but submitted written submissions citing legal precedents. The Tribunal referred to a judgment of the jurisdictional High Court emphasizing the importance of considering the assessee's explanation before levying a penalty. The Tribunal found that the AO had not considered the assessee's explanation adequately, leading to a violation of natural justice and non-application of mind. Consequently, the Tribunal quashed the penalty, stating that the AO did not act fairly, reasonably, or judicially in imposing the penalty.

4. Conclusion:
The Tribunal allowed the assessee's appeal, ruling that the penalty levied under section 271(1)(c) was unjust as the AO failed to consider the assessee's explanation properly. By following the principles of natural justice and the legal precedent cited, the Tribunal held that the penalty order was invalid and should not be upheld. The appeal was allowed, and the penalty was quashed.

5. Final Decision:
The Tribunal pronounced the order on 31st August 2022 in Ahmedabad, allowing the appeal of the assessee and nullifying the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for concealing income particulars.