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2024 (11) TMI 1096 - AT - Income TaxRight of the assessee (respondent) to defend the order of CIT(A) on the issue which was raised but not decided by the CIT(A) - Scope of cross objection - Raising plea before the Tribunal by way of application under Rule 27 of ITAT Rules, 1963 - Penalty proceedings u/s 270A and 271AAB - as alleged vague show cause notice issued u/s 274 r.w.s. 2701A / 271AAB, without specifying the limb under which, he proposed to initiate penalty proceedings under relevant sections - CIT(A) has not adjudicated the legal issue raised by way of written submission - whether the assessee can raise the said plea before the Tribunal by way of application under Rule 27 of ITAT Rules, 1963 or not. HELD THAT - This issue is no longer res-integra. Hon'ble Madras High Court in the case of CIT Vs. India Cement Ltd. 2019 (8) TMI 1485 - MADRAS HIGH COURT had considered identical issue and held that, once the assessee raised an issue before the CIT(A), which was not adjudicated by the first appellate authority can be deemed to be decided against the assessee and that the assessee was entitled to canvass the said issue before the Tribunal without independently filing the appeal in the light of Rule 27 of ITAT Rules, 1963. Hon'ble Bombay High Court in Peter Vaz and Others Vs. CIT 2021 (4) TMI 605 - BOMBAY HIGH COURT also considered very similar issue and held that Rule 27 of ITAT Rules, 1963 gives a right to the respondent in an appeal before the Tribunal to support the order appealed against on any of the grounds decided against him, even though he may not have appealed against the order. For supporting the order, it is not necessary for the respondent in the appeal to file a memorandum of cross objection challenging a particular finding that is rendered by the trial court against him, when the ultimate decree itself is in his favour. The sum and substance of ratio laid down by various courts is that the respondent can support the order appealed against on any points which has been decided against him by way of application under Rule 27 of ITAT Rules, 1963. Since the question raised by the assessee by way of application under Rule 27 of ITAT Rules, 1963 is purely a legal issue and further, the assessee has taken an argument before the Ld.CIT(A) on this issue by way of written submission, in our considered view, although the Ld.CIT(A) has not decided the issue against the assessee, application filed by the assessee under Rule 27 of ITAT Rules, 1963 is maintainable and thus admitted. Having admitted the application filed by the assessee under Rule 27 of ITAT Rules, 1963, we find that the assessee has challenged the issue of legality of notice issued u/s 274 r.w.s. 270A / 271AAB for both the assessment years for the first time before the Tribunal and the facts with regard to said legal issue are not on record. Since the Ld.CIT(A) has not discussed the issue or decided the issue raised by the assessee and further the assessee has raised the issue for the first time before the Tribunal, in our considered view, first appellate authority should get an opportunity to consider the legal issue raised by the assessee from his perspective and thus, we are of the considered view that, the issue needs to go back to the file of the Ld.CIT(A) for considering the preliminary legal issue raised by the assessee on validity of penalty proceedings initiated on the basis of vague notice issued u/s 274 r.w.s.270A/271AAB.
Issues Involved:
1. Legality of penalties imposed under sections 270A and 271AAB of the Income Tax Act. 2. Validity of the notice issued under section 274 read with sections 270A and 271AAB. 3. Interpretation of "undisclosed income" and "false entry" in the context of cash payments recorded in the books of accounts. Detailed Analysis: 1. Legality of Penalties Imposed under Sections 270A and 271AAB: The Revenue appealed against the orders of the CIT(A), which deleted penalties imposed on the assessee under sections 270A and 271AAB for the assessment years 2017-18 and 2018-19. The penalties were initially levied by the Assessing Officer (AO) on the grounds of under-reporting and mis-reporting of income due to cash payments made for the purchase of immovable properties, which were recorded under "Development Expenses" and "Site Salaries" in the books of accounts. The CIT(A) held that these entries did not constitute false entries as they were admitted as additional income in the returns filed under section 153A, and therefore, the penalties were not justified. 2. Validity of the Notice Issued under Section 274 r.w.s. 270A/271AAB: The assessee challenged the penalties on the basis that the notice issued under section 274, read with sections 270A and 271AAB, was vague and did not specify the precise limb under which the penalties were being levied. The Tribunal acknowledged that the issue of a vague notice was a legal question that could be raised at any stage of the proceedings. Although the CIT(A) did not adjudicate this issue, the Tribunal found that the assessee had raised it in written submissions. The Tribunal decided that the matter should be reconsidered by the CIT(A) to address the validity of the penalty proceedings initiated on the basis of the vague notice. 3. Interpretation of "Undisclosed Income" and "False Entry": The CIT(A) found that the additional income offered by the assessee did not fall within the definition of "undisclosed income" as per section 271AAB. The cash payments recorded in the books of accounts were shown under "Advances" in the balance sheet and were therefore not considered undisclosed. Furthermore, the CIT(A) concluded that the entries in question were not false, as they were not patently incorrect or made with the intention to deceive. The Tribunal supported the CIT(A)'s view that the case did not involve recording false entries, as the cash payments were admitted as income in compliance with section 153A. Conclusion: The Tribunal set aside the orders of the CIT(A) and remanded the case for a fresh examination of the preliminary legal issue concerning the validity of the penalty proceedings based on the vague notice. The CIT(A) was instructed to reconsider the legal issue and address the merits of the case for both assessment years. The appeals filed by the Revenue were allowed for statistical purposes, pending the outcome of the reconsideration by the CIT(A).
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