2025 (4) TMI 344 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition made u/s 68 - reassessment order was passed by the AO u/s.147/144 as there was no compliance on the part of the assessee which led to addition on account of cash deposits in the bank account - HELD THAT - Assessee has not filed any return of income. The matter against quantum additions made by the AO reached Tribunal and the Tribunal has restored the quantum additions to the file of AO for denovo re-assessment and to verify the additional evidences and submissions filed by the assessee for the first time before ITAT. The assessee is claiming that he is small trader in shoe on Feri basis and the income being below taxable limits no return of income was filed. Assessee has claimed before ITAT against quantum additions that the bank account in which cash was deposited is a joint account with his brothers who has owned up the bank deposit in the said bank account. The affidavits executed by his brother were filed before the ITAT in the quantum proceedings and Tribunal restored the matter back to the file of AO for fresh determination of the issue after considering affidavits and other submissions. Since the Tribunal has restored the quantum additions back to the file of the AO to denovo frame reassessment in quantum it will be fair and appropriate that this matter relating to levying of penalty u/s 271(1)(c) be also restored back to the file of AO for fresh determination. The appeal of the assessee is allowed for statistical purposes.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961, for concealment of income was justified.
Whether the delay in filing the appeal should be condoned.
Whether the reassessment proceedings and subsequent penalty were valid given the claim that the bank account and deposits belonged to the assessee's brother.

ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay

Relevant Legal Framework and Precedents: Section 253(3) of the Income-tax Act prescribes the time limit for filing appeals. The Supreme Court's decision in Collector Land Acquisition, Anantnag & Ors. vs Mst. Katiji & Ors. provides guidance on condoning delays when substantial justice is at stake.
Court's Interpretation and Reasoning: The Tribunal found that the delay of 28 days was due to the assessee's illness, which was a sufficient and reasonable cause. The Tribunal emphasized the principle that substantial justice should prevail over technical considerations.
Conclusion: The delay was condoned, allowing the appeal to be heard on its merits.

Justification of Penalty under Section 271(1)(c)

Relevant Legal Framework and Precedents: Section 271(1)(c) deals with penalties for concealment of income or furnishing inaccurate particulars. The penalty is contingent upon the assessee's failure to provide a satisfactory explanation for discrepancies.
Court's Interpretation and Reasoning: The Tribunal noted that the penalty was originally imposed due to unexplained cash deposits in the assessee's bank account. However, the assessee claimed that the deposits belonged to his brother, supported by an affidavit.
Key Evidence and Findings: The affidavit from the assessee's brother stated that the deposits were his, not the assessee's. The Tribunal had previously remanded the quantum addition issue to the Assessing Officer (AO) for verification of this evidence.
Application of Law to Facts: Given the pending reassessment of the quantum addition, the Tribunal deemed it appropriate to also remand the penalty issue to the AO for reconsideration in light of the new evidence.
Conclusion: The matter was remanded to the AO for fresh determination of the penalty after reassessing the quantum addition.

Validity of Reassessment Proceedings

Relevant Legal Framework and Precedents: Section 147 allows for reassessment if there is reason to believe income has escaped assessment. Section 148 requires a notice to be issued for such reassessment.
Court's Interpretation and Reasoning: The Tribunal observed that the reassessment was initiated based on AIR information about unexplained cash deposits. The assessee failed to comply with notices, leading to an ex parte assessment.
Key Evidence and Findings: The Tribunal previously restored the quantum addition issue to the AO for reevaluation, considering the affidavit and additional evidence presented by the assessee.
Conclusion: The Tribunal decided that the penalty issue should also be reconsidered by the AO, in conjunction with the reassessment of the quantum addition.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "If substantial justice and technical considerations are pitted against each other, courts will lean towards advancement of substantial justice unless malafide is at writ large on the part of the litigant."
Core Principles Established: The Tribunal emphasized the importance of substantial justice over procedural technicalities, particularly when new evidence could potentially alter the outcome of the case.
Final Determinations on Each Issue: The appeal was allowed for statistical purposes, and the penalty issue was remanded to the AO for fresh determination following the reassessment of the quantum addition.