2023 (5) TMI 351 - AT - Income Tax

Maintainability of appeal as filled manually - mode of filing appeal - electronically or in physical mode - the assessee being a corporate entity, was required to file return electronically - HELD THAT - Return form for filing return of income was being a voyage return filed by the agent on behalf of the freight beneficiary, as per the provisions of section 172(3) the filing of the return was to be in form VVR i.e. voyage return, as canvassed by the Ld.Counsel for the assessee both to the Ld.CIT(A) and even before us. Without controverting this fact and finding it to be incorrect the CIT(A) clearly was in error in stating that being a corporate assessee the return should have been filed electronically. Therefore, dismissal by the CIT(A) of the assessee s appeal, we find was based on incorrect appreciation of the facts. Mere mode of filing appeal - electronically or in physical mode ,alone should not take away the assessee s right to appeal, being just a technical/ procedural aspect that too not mandated by statute but by CBDT notification which has no persuasive value and is binding only on its Revenue Officers.. Therefore also the order of the ld.CIT(A) dismissing the assessee s appeal as not admitted is set aside. Levy of penalty u/s 271(1)(c) - assessee, being an agent of freight beneficiary had filed various voyage final returns u/s 172(3) of the Act without paying freight taxes - HELD THAT - The assessee had claimed DTAA benefit vis a vis Denmark for the said purpose, but the AO held that the assessee had wrongly claimed DTAA benefit and accordingly withdrew the same. Thus, 7.5% of the total freight earned in India by the assessee was treated as its taxable income and penalty levied on the same for having concealed/furnishing inaccurate particulars of income. The ITAT passed order 2015 (11) TMI 274 - ITAT RAJKOT holding that profits embedded in the freight receipts were not taxable in India and deleted the demand raised on the assessee. Since the quantum addition stands deleted by the ITAT in the above order, there remains no basis for levy of penalty under section 271(1)(c) and therefore the same is directed to be cancelled. The grounds of appeal of the assessee are allowed.

Summary

Issues:
1. Levy of penalty for concealing/furnishing inaccurate particulars of income under section 271(1)(c) of the Income Tax Act, 1961.
2. Dismissal of the assessee's appeal by the ld.CIT(A) for not filing the appeal electronically as mandated by CBDT notification.

Analysis:
1. The appeal was filed against the order of the ld.CIT(A) regarding the penalty levied under section 271(1)(c) of the Act for concealing/furnishing inaccurate particulars of income. The ld.CIT(A) dismissed the appeal as invalid since it was filed manually instead of electronically. The assessee contended that as an agent of a freight beneficiary, it was required to file voyage returns manually as per section 172(3) of the Act. The ld.CIT(A) incorrectly held that being a corporate assessee, the return should have been filed electronically. The ITAT found the dismissal of the appeal unjustifiable as the notification by CBDT did not mandate electronic filing for the assessee in this case. The ITAT emphasized that the mode of filing, electronically or physically, should not impede the right to appeal, especially when it's a technical/procedural aspect not mandated by statute but by a notification.

2. On the merits of the case, it was noted that the addition on which the penalty was based had been deleted by the ITAT in a previous order. The assessee, as an agent of a freight beneficiary, had filed voyage final returns under section 172(3) without paying freight taxes, claiming DTAA benefit with Denmark. The AO disallowed the DTAA benefit, resulting in a penalty for concealing income. However, the ITAT's previous order held that the profits embedded in the freight receipts were not taxable in India, leading to the deletion of the demand raised on the assessee. Consequently, since the quantum addition was deleted, there was no basis for the penalty under section 271(1)(c), and it was directed to be canceled. Therefore, the grounds of appeal of the assessee were allowed, and the appeal was allowed in favor of the assessee.

In conclusion, the ITAT held that the dismissal of the appeal by the ld.CIT(A) was incorrect, and on the merits, the penalty levied was unjustified as the addition was deleted by the ITAT. The ITAT directed the cancellation of the penalty, allowing the appeal of the assessee.