2018 (12) TMI 313 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - non-appearance of the Assessee - no proper serving of notice - Held that - The import of Explanation 1 to s. 271(1)(c), deeming a concealment of particulars of income when the assessee is unable to furnish an explanation or furnishes one which is found to be false or is unsubstantiated, which is applicable in respect of any facts material to the computation of income, i.e., irrespective of whether the default prima facie is for furnishing inaccurate particulars of income or concealment of particulars of income, may also have a bearing in the matter. As indicated by the Bench during hearing, considered proper that the matter be decided by the first appellate authority while considering the assessee s appeal, which also remains to be decided by him on quantum. Under the circumstances, it may not be proper for the tribunal to proceed to decide the appeal on penalty on merits, and explains the disinclination of the tribunal to decide the penalty on merits. Accountant Member decision As per judicial member Judicial Member in both the appeals, the Ld. CIT(A) has passed the order ex- parte and not on merit. The stand of the assessee was that the notices for the hearing have been sent to the Kathua address where the assessee was doing work, had already been closed, however, the notices were never been served at Delhi address which is specifically mentioned by the assessee in Form No.35. The assessee has also filed an affidavit in support of its contention. The Bench even verified the appellate record of the Ld. CIT(A) and found that the notices were never been sent/served at Delhi address which is mentioned in Form No.35. As proper notices have not been served to the assessee, therefore, the assessee did not get reasonable and proper opportunities of being heard and even otherwise the Ld. CIT(A) did not pass the orders on merit, hence, proper course would be to set aside the cases to the files of the Ld. CIT(A) to decide afresh while affording reasonable and proper opportunities of being heard to the assessee. Hence ordered accordingly. Assessee s appeals allowed for statistical purposes.

Summary

Issues:
1. Denial of proper opportunity of hearing to the assessee by the first appellate authority.
2. Validity of the penalty imposed under section 271(1)(c) of the Income Tax Act.

Issue 1 Analysis:
The judgment involves two Appeals by the Assessee challenging the Order by the Commissioner of Income Tax (Appeals) dismissing the assessee's appeals contesting its assessment under section 144 of the Income Tax Act for Assessment Year 2012-13 and the levy of penalty under section 271(1)(c) of the Act. The main contention raised by the assessee's counsel was that the impugned orders confirming the assessment and penalty were ex parte, and the assessee was not given a proper opportunity to present its case before the first appellate authority. The assessee argued that notices of hearing were sent to a closed address, resulting in a denial of opportunity to the assessee. The Tribunal observed discrepancies in the addresses used for communication and concluded that the assessee was not granted a fair opportunity to be heard. Therefore, the Tribunal set aside the orders and restored the appeals to the first appellate authority for a fresh adjudication after providing a reasonable opportunity of hearing to both parties.

Issue 2 Analysis:
Regarding the penalty imposed under section 271(1)(c) of the Act, the assessee cited a decision in HPCL Mittal Energy Ltd. v. Addl. CIT, where it was argued that the penalty was not sustainable. The Tribunal, while acknowledging this argument, refrained from delving into the penalty issue due to the set-aside of the orders. The Tribunal emphasized that the assessee could raise all issues, including those related to the penalty, before the first appellate authority for a comprehensive consideration. The Tribunal highlighted the importance of proper notices and opportunities for the assessee and ordered a fresh decision by the first appellate authority. Consequently, the appeals were allowed for statistical purposes, and the cases were remanded to the first appellate authority for a fair and thorough adjudication.

In conclusion, the judgment addresses the denial of proper opportunity to the assessee by the first appellate authority and the validity of the penalty imposed under section 271(1)(c) of the Income Tax Act. The Tribunal emphasized the importance of fair hearings and proper communication in tax proceedings, leading to the decision to set aside the orders and allow the appeals for statistical purposes, remanding the cases for a fresh adjudication with due opportunities for both parties.