EARTH REALITY,VADODARA V. THE DY.CIT, CIRCLE-1(1)(1), VADODARA

ITA 460/AHD/2025

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The case involves Earth Reality, a partnership firm engaged in real estate development, which faced penalties for not disclosing additional income during the assessment year 2015-16. Following a survey under section 133A of the Income-tax Act, 1961, the firm admitted to undisclosed income and paid advance tax but failed to include this income in its tax return. The Assessing Officer added this income as unaccounted and initiated penalty proceedings under section 271(1)(c) for concealment of income. The firm appealed against the penalty, which was confirmed by the CIT(A) and later challenged before the Tribunal. The Tribunal dismissed the appeal, emphasizing the firm's non-compliance and lack of substantive evidence to support claims of inadvertent omission.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 313932 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Other Referred Cases: Kantilal Siyaram (ITA Nos. 685 & 688/Ahd/2012)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHAVNASINGH GUPTA
• Assessee Lawyers: HEMANT SUTHAR
• Keywords: Set aside; Opportunity of being heard; Revised return; Income from undisclosed sources; Principle of natural justice
• Section: 271(1)(c); 133A; 139(5)

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ] BEFORE S/SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.460/Ahd/2025 Asstt.Year : 2015-16 Earth Reality Earth-49, Opp: Misuza Court Vasna Road, Vadodara 390 007 PAN : AADFE 0069 N Vs DCIT, Cir.1(1)(1) Vadodara. (Applicant) (Responent) Assessee by : Shri Hemant Suthar, AR Revenue by : Ms.Bhavnasingh Gupta, Sr.DR सुनवाई क तारीख/Date of Hearing : 30/04/2025 घोषणा क तारीख /Date of Pronouncement: 05/05/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal by the assessee is directed against the order dated 09.01.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]) confirming the penalty levied under section 271(1)(c) by the Assessing Officer in respect of A.Y. 2015–16. Facts of the Case 2. The assessee, a partnership firm engaged in the business of real estate development, filed its return of income for A.Y. 2015–16 on 30.03.2016 declaring Nil income. A survey under section 133A of the Act was conducted in the case of the assessee and its group concerns ITA No.460/Ahd/2025 2 on 10.01.2012. In the course of survey, the assessee admitted additional undisclosed income of Rs.2 crores, which was bifurcated between A.Y. 2012–13 (Rs.1,86,93,306/-) and A.Y. 2015–16 (Rs.14,00,000/-). Though the assessee paid advance tax of Rs.4,50,000/- on 25.03.2015 in respect of the sum of Rs.14,00,000/- , it failed to include the said income in the return of income filed for A.Y. 2015–16. During the assessment proceedings under section 143(3), the Assessing Officer issued a show-cause notice dated 17.04.2017 seeking explanation. The assessee responded vide letter dated 20.04.2017 stating that the omission to include the income and to claim the advance tax paid was inadvertent and unintentional. However, the Assessing Officer rejected the explanation and added Rs.14,00,000/- as unaccounted income. Assessment order became final, since no appeal filed against it Penalty proceedings under section 271(1)(c) were separately initiated, assessee failed to response to notices, therefore, vide order dated 31.10.2017, penalty of Rs.4,32,600/- was levied on the ground of concealment of income. 3. The assessee filed appeal before the CIT(A) challenging the levy of penalty. Hearing notices were issued to the assessee on multiple occasions, including 14.12.2018, 07.01.2021, 01.11.2022, 06.08.2024, 05.12.2024, and 18.12.2024. However, there was no response from the assessee to any of the notices. Consequently, the CIT(A) dismissed the appeal ex-parte, confirming the penalty, without adjudicating on merits. 4. Aggrieved by the order of CIT(A) the assessee has raised the following grounds before us: 1. The Ld. CIT(A), National Faceless Appeal Centre (NAC), Delhi has erred in law and in facts in confirming the order of the Ld. A.O. without affording reasonable opportunity of being heard and making an ex-parte order. Since the order is ITA No.460/Ahd/2025 3 passed in violation of principles of natural justice, the same is prayed to be set aside. 2. Without prejudice to the Ground No. 1, the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi has erred in law and in facts in confirming the order of the Ld. A.O. by passing an ex-parte order without adjudicating the matter on merits of the case. The order so passed is bad in law and is prayed to be set aside. 3. The Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming the action of the Ld. A.O. in levying penalty u/s. 271(1)(c) of the I.T Act, 1961 of Rs. 4,32,600/-. The Ld. CIT(A) ought to have appreciated the fact that the appellant firm has disclosed an amount of Rs. 14,00,000/- for A.Y 2015- 16 during the survey proceedings and accordingly also paid advance tax of Rs. 4,50,000/- on 25/03/2015 and that through inadvertence, the appellant missed to disclose the said income of Rs. 14,00,000/- and also to claim the advance tax paid of Rs. 4,50,000/- while filing the return of income for the year under consideration. The impugned levy of penalty of Rs. 4,32,600/- being bad in law and in facts is prayed to be deleted. 4. Being aggrieved by the action of the Ld. A.O., the appellant is in appeal before your honour. 5. During the course of hearing before us the learned AR submitted that the levy of penalty under section 271(1)(c) is wholly unjustified in the facts and circumstances of the case. The amount of Rs.14,00,000/- was voluntarily disclosed by the assessee during the survey under section 133A and advance tax of Rs.4,50,000/- was paid on 25.03.2015 towards the same. However, due to inadvertence and human error, the said income was not offered in the return and the advance tax paid was also not claimed. The learned AR contended that there was no intention to conceal the income or furnish inaccurate particulars thereof, and the omission was purely bona fide. It was submitted that merely because of such inadvertent mistake, penalty under section 271(1)(c) ought not to be levied, particularly when there is no allegation of mala fides or deliberate evasion. 6. Further reliance was placed on the decision of the Coordinate Bench in Kantilal Siyaram (ITA Nos. 685 & 688/Ahd/2012), where under identical facts penalty was directed to be deleted upon verification of advance tax paid. Accordingly, the AR prayed for setting aside the impugned order and for deletion of the penalty, or in the alternative, for remanding the matter back to the Assessing Officer for ITA No.460/Ahd/2025 4 proper verification of the payment of advance tax and consequent adjudication. 7. The learned Senior Departmental Representative relied upon the findings of the Assessing Officer and the CIT(A) in support of the impugned penalty under section 271(1)(c). 8. We have carefully considered the orders of the Assessing Officer and the CIT(A), the materials placed on record, and the rival contentions. It is an admitted fact that the assessee disclosed a sum of Rs. 14,00,000/- during the course of survey conducted under section 133A on 10.01.2012 and paid advance tax of Rs. 4,50,000/- on 25.03.2015. However, the assessee did not include the said income in the return of income filed under section 139(1), nor did it file a revised return under section 139(5) to correct the omission. Instead, the assessee submitted only a revised computation of income during the assessment proceedings, which cannot be equated with a revised return. It is well settled that a revised computation has no statutory standing and does not cure the concealment made in the original return. The Assessing Officer, noting this omission, added Rs. 14,00,000/- as unaccounted income and initiated penalty proceedings under section 271(1)(c). Despite being provided sufficient opportunity, including through a show cause notice dated 18.10.2017, the assessee chose not to participate in the penalty proceedings. The penalty was thereafter levied at the minimum leviable rate of 100% of tax sought to be evaded, i.e., Rs. 4,32,600/-. Even before the CIT(A), the assessee failed to file any submission or explanation, and the appeal was dismissed ex-parte. 9. Before us, the learned AR has sought to justify the non- disclosure in the return by contending that the omission was inadvertent and that the assessee’s bona fide intent is evident from ITA No.460/Ahd/2025 5 the advance tax payment made on 25.03.2015. However, this explanation remains wholly unsubstantiated by any contemporaneous evidence or documentary material. It is pertinent to note that the survey under section 133A was conducted much earlier—on 10.01.2012—wherein the assessee admitted to unaccounted income of Rs. 14,00,000/- relatable to A.Y. 2015–16. Despite this, the assessee filed its return of income much later, on 30.03.2016, declaring Nil taxable income, without disclosing the admitted sum or claiming the advance tax allegedly paid. Significantly, the assessee did not file a revised return under section 139(5) to rectify the omission, nor did it make any attempt to explain the lapse in a timely or structured manner. More critically, the assessee did not participate at all in the penalty proceedings, despite being issued a specific notice under section 274 read with section 271(1)(c), dated 18.10.2017. The Assessing Officer was constrained to finalise the penalty ex parte, noting that no cause or defence had been furnished by the assessee. Further, the assessee did not prefer any appeal against the quantum addition, thereby allowing the assessment to attain finality. These facts collectively dispel any claim of inadvertence or good faith and instead point toward a pattern of consistent non-compliance and passive acquiescence to the proceedings. The only document placed on record—a revised computation submitted during the assessment—was not accompanied by any affidavit, revised return, or legal explanation. This reinforces the conclusion that the revised computation was a belated and reactive measure, prompted solely by detection during scrutiny proceedings. It is further pertinent to observe that if such conduct were normalized, it would create an unintended loophole in the self-assessment regime, allowing taxpayers to shift tax liabilities at will, citing belated errors post-detection, thereby undermining the discipline and integrity of voluntary compliance envisaged under the ITA No.460/Ahd/2025 6 Income-tax Act. In the present case, the income in question surfaced only as a result of the survey conducted under section 133A of the Act. There is nothing on record to suggest that, in the absence of such survey, the assessee would have voluntarily declared the income or paid tax thereon. The assessee’s reliance on the decision of the Coordinate Bench in Kantilal Siyaram & Shri Manojkumar Kantilal Shah (supra) is misconceived and factually distinguishable. In that case, the assessee had filed a revised return, substantiated the advance tax payment, and actively participated in the penalty proceedings, explaining the omission. The Bench, in those circumstances, remitted the matter to the Assessing Officer for factual verification. In the present case, however, the assessee has neither filed a revised return, nor offered any explanation for the omission, nor participated at any stage in the penalty or appellate proceedings. The conduct of the assessee does not reflect a bona fide error, but rather gross neglect or deliberate concealment, squarely attracting the consequences prescribed under section 271(1)(c). 10. As regards Ground Nos. 1 and 2, wherein the assessee has contended that the CIT(A) erred in law and in facts by passing an ex- parte order without affording a reasonable opportunity of being heard, and without adjudicating the matter on merits, we find no merit in such contentions. The appellate order explicitly records that the assessee was issued multiple notices through the e-filing portal by the CIT(A), including a final show cause notice dated 18.12.2024. Despite such repeated opportunities, the assessee chose not to file any written submissions, nor sought adjournment or provided any explanation for non-compliance. It is a settled proposition of law that the right to be heard is not unqualified, and where a party, despite being afforded sufficient opportunity, fails to respond, the appellate authority is justified in proceeding ex-parte. ITA No.460/Ahd/2025 7 11. As regards the argument that the CIT(A) failed to adjudicate the matter on merits, it is equally untenable. The CIT(A) having recorded the absence of response despite repeated notices, proceeded to confirm the penalty based on the material available on record, including the assessment and penalty orders. The CIT(A) was not required to re-frame or re-argue the assessee’s case in the absence of any plea or factual rebuttal placed before it. The duty to prosecute an appeal lies with the appellant. If the assessee abstains from proceedings without cause, it cannot later allege that the appeal was not adjudicated on merit. As held by courts, a party cannot take advantage of its own inaction or default to claim relief on principles of natural justice. Hence, both grounds alleging procedural infirmity and lack of merit-based adjudication are devoid of substance and are accordingly rejected. 12. Considering the totality of circumstances, we hold that the assessee’s conduct falls squarely within the purview of Explanation 1 to section 271(1)(c), which creates a presumption of concealment where no satisfactory explanation is offered. The penalty has been rightly levied and confirmed by the lower authorities. 13. In the result, the appeal is dismissed. Order pronounced in the Court on 5th May, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 05/05/2025 vk* "