2025 (1) TMI 814 - AT - Income Tax

Penalty u/s 270A - quantification of the penalty - Allocation of allocation of 10% of administrative and other expenses to the 80-IA unit - HELD THAT - We observe that while dismissing the appeal of the assessee against the Section 270A order, CIT(A) did not take into consideration the facts of the case submitted by the assessee (in Form No. 35) in which it was pointed out that CIT(A) had granted substantial relief to the assessee in quantum proceedings. It is further observed that CIT(A) has also not taken into consideration the grounds of appeal of the assessee in which it was submitted that since the entire additions were on account of ad-hoc apportionment of expenses, penalty was not liable to be levied in the instant facts under Section 270A of the Act. On going through the contents of the order passed by the Ld. CIT(A), it is observed that Ld. CIT(A) has not discussed either the facts of the case submitted by the assessee and nor discussed the grounds of appeal raised by the assessee. Thus matter is restored to the file of Ld. CIT(A) for de-novo consideration and to pass appropriate orders - Appeal of the assessee is allowed for statistical purposes.

2024 (9) TMI 1334 - AT

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

Whether the Ld. CIT(A) erred in passing the impugned orders ex-parte and without deciding the appeals on merits.
Whether the penalty under Section 270A of the Income Tax Act was correctly levied by the Assessing Officer.
Whether the quantification of the penalty was erroneous and excessive.
Whether the penalty order was barred by limitation and thus not sustainable.
Whether the Ld. CIT(A) properly appreciated and considered the evidence and supporting documents during the assessment proceedings.
Whether the addition of Rs. 31,46,961/- under Section 28 on account of duty drawback was justified.
Whether the disallowance of Rs. 2,70,94,527/- under Section 80-IA of the Act was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Ex-parte Order by Ld. CIT(A)

Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to be heard. Section 250(6) of the Income Tax Act mandates that orders should be passed after considering the submissions made by the parties.
Court's Interpretation and Reasoning: The Tribunal noted that the Ld. CIT(A) dismissed the appeals due to non-appearance without considering the merits of the case, which violated the principles of natural justice.
Key Evidence and Findings: The Tribunal observed that the Ld. CIT(A) did not discuss the facts or grounds of appeal raised by the assessee.
Application of Law to Facts: The Tribunal applied the precedent set in Amitkumar Dhirajlal Joshi vs. ITO, where an ex-parte order was set aside for violating natural justice principles.
Treatment of Competing Arguments: The Tribunal favored the assessee's argument that the appeal should be heard on merits.
Conclusions: The Tribunal restored the matter to the file of Ld. CIT(A) for de-novo consideration, ensuring a fair hearing.

Issue 2: Penalty under Section 270A

Legal Framework and Precedents: Section 270A of the Income Tax Act deals with penalties for under-reported income. The penalty is generally 50% of the tax on the under-reported income.
Court's Interpretation and Reasoning: The Tribunal noted that the Ld. CIT(A) did not consider the substantial relief granted to the assessee in quantum proceedings when deciding on the penalty.
Key Evidence and Findings: The Ld. CIT(A) had provided relief in quantum proceedings, which was not considered in the penalty proceedings.
Application of Law to Facts: The Tribunal found that the penalty was levied without considering the relief granted in quantum proceedings, which was against the principles of natural justice.
Treatment of Competing Arguments: The Tribunal agreed with the assessee that the penalty was not justified under the circumstances.
Conclusions: The Tribunal set aside the penalty order and remanded the matter back to the Ld. CIT(A) for reconsideration.

Issue 3: Quantification of Penalty

Legal Framework and Precedents: The quantification of penalty under Section 270A should be based on accurate assessment and allocation of income and expenses.
Court's Interpretation and Reasoning: The Tribunal found that the penalty quantification was based on an ad-hoc apportionment of expenses, which was not justified.
Key Evidence and Findings: The Tribunal noted discrepancies in the allocation of expenses between the power plant and steel units.
Application of Law to Facts: The Tribunal determined that the penalty was excessive due to incorrect expense allocation.
Treatment of Competing Arguments: The Tribunal sided with the assessee, finding the penalty quantification erroneous.
Conclusions: The Tribunal directed a reassessment of the penalty based on accurate expense allocation.

Issue 4: Barred by Limitation

Legal Framework and Precedents: The limitation period for passing penalty orders is governed by specific provisions in the Income Tax Act.
Court's Interpretation and Reasoning: The Tribunal noted that the penalty order was passed without awaiting the appeal effect, raising questions about its timeliness.
Key Evidence and Findings: The penalty order was passed while the appeal effect was pending.
Application of Law to Facts: The Tribunal found that the penalty order might be barred by limitation due to procedural lapses.
Treatment of Competing Arguments: The Tribunal found merit in the assessee's argument regarding the limitation period.
Conclusions: The Tribunal remanded the matter for reconsideration of the limitation issue.

Issue 5: Addition under Section 28 and Disallowance under Section 80-IA

Legal Framework and Precedents: Section 28 deals with income from business or profession, while Section 80-IA provides deductions for certain undertakings.
Court's Interpretation and Reasoning: The Tribunal noted that the Ld. CIT(A) did not consider the grounds of appeal related to these additions and disallowances.
Key Evidence and Findings: The Tribunal found that the Ld. CIT(A) did not discuss the individual grounds of appeal.
Application of Law to Facts: The Tribunal determined that the additions and disallowances were made without proper consideration of the assessee's submissions.
Treatment of Competing Arguments: The Tribunal found the assessee's arguments compelling and warranted reconsideration.
Conclusions: The Tribunal restored the matters to the Ld. CIT(A) for de-novo consideration.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes: "In the interest of justice, the matter is restored to the file of Ld. CIT(A) for de-novo consideration and to pass appropriate orders, after giving due opportunity of hearing to the assessee."
Core Principles Established: The principles of natural justice must be upheld in appellate proceedings, and penalty orders should consider all relevant facts and reliefs granted in quantum proceedings.
Final Determinations on Each Issue: Both appeals were allowed for statistical purposes, with matters remanded to the Ld. CIT(A) for fresh consideration, ensuring due process and fair hearing.

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