2024 (7) TMI 826 - AT - Income Tax

Orders appealable before the CIT(Appeals) u/s. 246A against Penalty u/s 270A - As is discernible from the order of the CIT(Appeals), the appeal filed by the assessee was dismissed for the reason that he held a conviction that the same did not fall within the realm of the orders which were appealable before him. HELD THAT - As an order imposing penalty u/s. 270A of the Act, which in turn finds place in Chapter XXI of the Act, is in clear and unequivocal terms an order appealable before the CIT(Appeals), therefore, a view to the contrary taken by the CIT(Appeals) in the present case before us cannot be sustained and is liable to be vacated. Also, on a careful perusal of the order of the CIT(Appeals), it transpires that he had while concluding as hereinabove wrongly referred to provisions of Section 246(1) of the Act, which we may herein observe are no more applicable after 01.06.2000. We are of the considered view that as the penalty imposed by the A.O vide his order passed u/s.270A of the Act dated 01.04.2022 clearly falls within the realm of the orders appealable before the CIT(Appeals) u/s 246A of the Act, therefore, the dismissal of the appeal of the present assessee company by taking a view to the contrary by the CIT(Appeals) cannot be sustained. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and restore the matter to his file with a direction to him to dispose off the appeal afresh. CIT(Appeals) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee appellant.

Issues Involved:
1. Legality and validity of penalty order under Section 270A.
2. Jurisdiction and interpretation of CIT(A), NFAC under Section 246A.
3. Initiation of penalty proceedings during the assessment.
4. Violation of principles of natural justice.
5. Computation of misreported income.
6. Adjudication of grounds challenging the validity of the show-cause notice.
7. Specific disallowances leading to penalty imposition.

Detailed Analysis:

1. Legality and Validity of Penalty Order under Section 270A:
The assessee contended that the penalty levied under Section 270A was bad in law and liable to be quashed. The argument was that the penalty was imposed on additions made on a legal issue. The Tribunal noted that the penalty was imposed despite the fact that the explanation furnished by the assessee was not found to be bona fide and that all material facts had not been disclosed.

2. Jurisdiction and Interpretation of CIT(A), NFAC under Section 246A:
The CIT(A), NFAC dismissed the appeal on the ground that it did not fall within the orders appealable before him, as per Section 246A. However, the Tribunal found this observation to be perverse. As per Clause (q) to sub-section (1) of Section 246A, an order imposing penalty under Chapter XXI, which includes Section 270A, is appealable before the CIT(A). The Tribunal set aside the CIT(A)'s order and restored the matter to his file for fresh adjudication.

3. Initiation of Penalty Proceedings During the Assessment:
The assessee argued that the penalty under Section 270A was void ab initio as it was not initiated during the assessment proceedings. The Tribunal noted that while the assessment order mentioned initiation of penalty under Section 271(1)(c), the penalty was ultimately imposed under Section 270A, which was not initiated during the assessment.

4. Violation of Principles of Natural Justice:
The assessee claimed that the penalty was levied in violation of the principles of natural justice and without application of mind. The Tribunal observed that the AO had levied the penalty without specifying any circumstances or actions as provided in Section 270A(9) in the penalty show-cause notice, rendering the penalty order bad in law.

5. Computation of Misreported Income:
The AO computed misreported income at Rs. 18,06,70,76,627 arbitrarily, without providing any breakup. The Tribunal found this computation to be without basis and not supported by any detailed analysis or evidence.

6. Adjudication of Grounds Challenging the Validity of the Show-Cause Notice:
The CIT(A), NFAC erred in not adjudicating the ground of appeal challenging the validity of the show-cause notice issued before levying penalty under Section 270A. The Tribunal directed the CIT(A) to dispose of the appeal afresh, considering all grounds raised by the assessee.

7. Specific Disallowances Leading to Penalty Imposition:
The Tribunal noted several specific disallowances that led to the imposition of penalty, including:
- Disallowance of provision for mine closure.
- Disallowance of OBR expenses.
- Disallowance of expenditure on power and fuel on an ad-hoc basis.
- Disallowance of provision for pay revision of executives.
- Disallowance of expenditure on coal transportation through ex-servicemen transport companies.
- Disallowance of depreciation on railway siding leased to other companies.
- Disallowance of compensation paid to employees based on actuarial valuation.
- Disallowance of expenditure on land compensation and rehabilitation.
- Additions made due to short credit of interest income.
- Disallowance of depreciation on hospital building leased to Apollo Hospitals.

The Tribunal directed the CIT(A) to re-adjudicate these issues afresh, ensuring a reasonable opportunity of hearing to the assessee.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s order and directing a fresh adjudication of the appeal, considering all grounds raised by the assessee. The Tribunal emphasized the need for adherence to legal mandates and principles of natural justice in the adjudication process.

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