2021 (5) TMI 872 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee has not responded to the notices - HELD THAT - Since the additions on which penalty was imposed by the Assessing Officer and sustained by the CIT(A) has been remanded back to the file of the Assessing Officer for thorough investigation/examination to decide the same afresh, therefore, the penalty does not survive at this juncture. Hence, we direct the Assessing Officer to initiate fresh penalty proceedings after completion of fresh Assessment proceedings according to the law and provisions of penalty. Hence, the appeal of the assessee is allowed.

Summary

Issues:
1. Validity of penalty order under section 271(l)(c) of the Income Tax Act, 1961.
2. Proper service of show cause notice u/s 274 read with section 271 (l)(c) of the Income Tax Act, 1961.
3. Imposition of penalty based on an ex-parte assessment order u/s 144 of the Income Tax Act, 1961.
4. Appeal against penalty order dated 26.06.2012 for A.Y. 2009-10.

Issue 1: Validity of Penalty Order under Section 271(l)(c) of the Income Tax Act, 1961:
The appeal was filed challenging the penalty order dated 26.06.2012 passed by the Assessing Officer, raising a demand of ?1,48,553 for A.Y. 2009-10. The appellant contended that the penalty order was against the principles of natural justice. The CIT(A) partly confirmed the demand of penalty. The Tribunal, in the quantum appeal, found that the Assessing Officer and CIT(A) did not provide sufficient opportunity to the assessee to substantiate their claim. Consequently, the Tribunal set aside certain grounds for thorough investigation and examination by the Assessing Officer. As the additions on which the penalty was based were remanded back for reevaluation, the penalty did not survive, leading to the allowance of the appeal.

Issue 2: Proper Service of Show Cause Notice u/s 274 read with Section 271 (l)(c) of the Income Tax Act, 1961:
The appellant argued that the penalty order was null and void as it was not preceded by proper service of show cause notice u/s 274 read with section 271 (l)(c) of the Income Tax Act, 1961. The CIT(A) did not adjudicate this ground of appeal on its merits. However, the Tribunal's decision to remand certain grounds back to the Assessing Officer for reevaluation encompassed a broader review of the entire penalty imposition process, ensuring that all procedural requirements were met in subsequent proceedings.

Issue 3: Imposition of Penalty based on an Ex-parte Assessment Order u/s 144 of the Income Tax Act, 1961:
The penalty was imposed on the basis of an ex-parte assessment order u/s 144 of the Income Tax Act, 1961, dated 05.12.2011, which was itself under appeal. The appellant requested that the penalty appeal should be disposed of after the appeal against the ex-parte assessment order u/s 144 was finalized. The Tribunal's decision to remand the additions back for thorough investigation and examination implied a reevaluation of the penalty imposition based on a more comprehensive assessment process, ensuring fairness and adherence to legal procedures.

Issue 4: Appeal Against Penalty Order Dated 26.06.2012 for A.Y. 2009-10:
The appellant challenged the penalty order dated 26.06.2012 for A.Y. 2009-10, contending that it was not in compliance with the principles of natural justice. The Tribunal's decision to set aside certain grounds for reevaluation by the Assessing Officer led to the allowance of the appeal, as the penalty did not survive due to the remand of the underlying additions for fresh assessment proceedings. The Tribunal directed the Assessing Officer to initiate fresh penalty proceedings after completing the reevaluation process, ensuring a fair and just outcome in accordance with the law.

In conclusion, the Tribunal's detailed analysis and decision in the appeal highlighted the importance of procedural fairness, thorough examination, and adherence to legal requirements in the imposition of penalties under the Income Tax Act, ultimately leading to the allowance of the appellant's appeal in this case.