2019 (3) TMI 908 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on account of capital gain - Assessment order in the case of one of the co-owners - HELD THAT - Assessment order in the case of one of the co-owners and submitted that the Assessing Officer in the said order has accepted the returned income without making any addition. On a pointed query by the Bench as to what has happened to the other co-owners, neither the assessee nor the DR could throw any light. It is also discernible from the paper book that the case is pending before the Hon ble Delhi High Court. Considering the totality of the facts of the case and considering the fact that the Assessing Officer in the case of one of the co-owners has not made any addition on account of capital gain and since it is not known as to what has happened in the case of other co-owners, therefore, I deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh, after giving due opportunity of being heard to the assessee. The Assessing Officer shall decide the issue as per fact and law. Thus hold accordingly. Grounds raised by the assessee are accordingly allowed for statistical purposes.

Issues:
1. Reopening of assessment and validity of reassessment proceedings.
2. Addition of income without application of mind.
3. Challenge to penalty levied under section 271(1)(c) of the IT Act.

Reopening of Assessment and Validity of Reassessment Proceedings:
In the case, the Assessing Officer reopened the assessment by issuing a notice under section 148 to tax the amount received by the co-owners as sale consideration for a property transaction. The assessee challenged the addition made by the Assessing Officer in the reassessment proceedings before the CIT(A), questioning both the addition on merit and the validity of the reassessment proceedings. Despite the challenges raised, the CIT(A) dismissed both grounds and ruled against the assessee. Subsequently, the assessee appealed the CIT(A)'s decision, arguing various points such as incorrect address for notices, lack of service of statutory notices, and the addition made without proper application of mind by the Assessing Officer. The ITAT, after considering the facts and circumstances, decided to restore the issue to the file of the Assessing Officer for fresh adjudication, directing a reevaluation of the issue with due opportunity for the assessee to be heard. The grounds raised by the assessee were allowed for statistical purposes.

Addition of Income Without Application of Mind:
The ITAT noted that the case was related to a property transaction involving co-owners, with discrepancies in the treatment of capital gains among the co-owners. While one co-owner's case resulted in no addition by the Assessing Officer, the situation for other co-owners was unclear, with a pending case before the Delhi High Court. Given this inconsistency and lack of clarity, the ITAT decided to remand the issue back to the Assessing Officer for a fresh decision based on facts and law. The ITAT allowed the assessee's grounds for statistical purposes, emphasizing the need for a fair and thorough assessment process.

Challenge to Penalty Levied under Section 271(1)(c) of the IT Act:
Regarding the penalty levied under section 271(1)(c) of the IT Act, the assessee challenged the CIT(A)'s decision to confirm the penalty amount. However, considering that the quantum appeal had been set aside for reassessment, the ITAT found the penalty levied by the Assessing Officer unsustainable. Consequently, the ITAT decided to delete the penalty imposed by the Assessing Officer and upheld by the CIT(A). The Assessing Officer was given the liberty to initiate fresh penalty proceedings after completing the assessment. As a result, the appeal filed by the assessee challenging the penalty was allowed.

In conclusion, the ITAT's judgment addressed the issues of reassessment validity, addition of income without proper assessment, and the challenge to the penalty under the IT Act, providing detailed analysis and directions for each aspect of the case.

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