ELECTRONIC INSTRUMANTATION & CONTROL PRIVATE LIMITED,AHMEDABAD V. THE ITO, WARD-2(1)(1), (PREVIOUSLY CIRCLE-2(1)(1)), AHMEDABAD

ITA 1964/AHD/2024

AI Insights

The case involves Electronic Instrumentation & Control Pvt. Ltd., which appealed against the penalty imposed by the Income Tax Officer (ITO) under Section 271(1)(c) of the Income Tax Act, 1961, for the Assessment Year 2011-12. The penalty was based on an addition of Rs.12,18,000/- to the company's income, which was treated as 'Income from Other Sources' instead of manufacturing income eligible for deduction under Section 80-IB. The ITAT had previously deleted this addition, but the CIT(A) upheld the penalty without considering the ITAT's decision. The Tribunal found the CIT(A)'s order to be non-speaking and mechanical, lacking independent reasoning, and thus set aside the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472259 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Other Referred Cases: ITA No.2837/Ahd/2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: PAMIL H. SHAH
• Keywords: Set aside; Principle of natural justice
• Section: 143(3); 271(1)(c); 80IB

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “सी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ C ” BENCH, AHMEDABAD \u0015ी टी.आर. से\u0018\u0019ल क ुमार, \u0011ाियक सद\u001b एवं \u0015ी मकरंद वसंत महादेवकर, लेखा सद\u001b क े सम!। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1964/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2011-12 Electronic Instrumentation & Control Private Limited 56, Panchratna Ind. Estate Changodhar Industrial Area Sarkhej Bavla Road Changodar, Ahmedabad – 382 213 (Gujarat) बनाम/ v/s. The ITO Ward-2(1)(1) [Previously Circle-2(1)(1)] Ahmedabad – 380 015 \u0013थायी लेखा सं./PAN: AAACE 4798 G (अपीलाथ$/ Appellant) (%& यथ$/ Respondent) Assessee by : Shri Pamil H. Shah Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 29/01/2025 घोषणा की तारीख /Date of Pronouncement: 31/01/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal is filed by the assessee against the order of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre (CIT(A)-NFAC), Delhi, dated 25.10.2024, confirming the penalty of Rs.1,13,900/- levied under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for the Assessment Year (AY) 2011-12. ITA No.1964/Ahd/2024 Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 2 Facts of the case: 2. The assessment was completed under Section 143(3) of the Act on 30.08.2013, wherein the AO made an addition of Rs.12,18,000/- by treating supervision income as \"Income from Other Sources\" instead of allowing it as manufacturing income eligible for deduction under Section 80-IB of the Act. Based on this addition, the AO initiated penalty proceedings under Section 271(1)(c) of the Act and levied a penalty of Rs.1,13,900/- vide order dated 23.03.2016. 3. The CIT(A), vide order dated 25.10.2024, upheld the penalty without considering the assessee’s submission that the ITAT had already deleted the addition in quantum proceedings vide order dated 14.10.2019. 4. Aggrieved by the order of CIT(A), the assessee is in appeal before us with the following grounds of appeal: 1. That the learned CIT (A) has erred in law and on facts of the case, in dismissing the appeal which is wholly unlawful and against the principles of natural justice and equity. That on the facts and in the circumstances of the case and in law, the learned CIT (A) NFAC, erred in confirming order made u/s. 271 ( 1) ( c) of the Income Tax Act, 1961 which is bad in law, ultra vires and without appreciating the facts, submission and evidences in the proper perspective which, is liable to be annulled. 2. That the CIT(A) has failed to independently apply their mind to the facts of the case and has merely endorsed the conclusions drawn by the AO. The order of the CIT(A) lacks detailed reasoning and appears to have dismissed the appeal without considering submission dated 16.10.2024 of the appellant Therefore, penalty u/s. 271(1) (c) of the income tax act. 1961 is not justified and deserve to be cancelled. 3. That our submission dated 16-10-2024 is not taken into consideration by CIT Appeal. ITAT has deleted the addition of Rs.368810/- vide ITAT order dated 14.10.2019. It is true that Ld. AO discussed the fact of the assessee's case ITA No.1964/Ahd/2024 Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 3 in para 3 and 4 of the assessment order and same was confirmed by the CIT (A), but later on ITAT (Ahmedabad) held treating supervision income of Rs.12,18,000/- as income from manufacturing activity for the purpose of computing deduction under section 80IB of the Act and as such addition made is deleted. Copy of ITAT order dated 14.10.2019 was submitted vide our submission dated 16.10.2024. As such there is no difference between assessed income and return income. This submission is fully ignored by CIT Appeal Therefore, penalty u/s. 271(1) (c) of the income tax act. 1961 is not justified and deserve to be cancelled. 4. The appellant craves leave to add, alter or modify the above grounds of appeal at the time of hearing. 5. The Authorized Representative (AR) of the assessee submitted that the Ahmedabad Bench, vide order dated 14.10.2019, held that supervision income of Rs.12,18,000/- was part of the manufacturing activity and therefore eligible for deduction under Section 80-IB and the entire addition was deleted, leading to no difference between returned income and assessed income. The AR also placed a copy of the ITAT order which was also submitted to CIT(A) along with the submission dated 16.10.2024, but it was completely ignored by the CIT(A). The AR argued that since the addition itself has been deleted, the penalty levied on such addition cannot survive. The AR also stated that the CIT(A) failed to apply independent reasoning and merely endorsed the findings of the AO and the assessee’s submission dated 16.10.2024 was completely ignored, which is a serious violation of natural justice. 6. The Departmental Representative (DR) conceded the facts and circumstances. ITA No.1964/Ahd/2024 Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 4 7. We have carefully examined the penalty order, the order of the CIT(A), and the submissions of the assessee. It is evident that the CIT(A) has passed a completely non-speaking and mechanical order without independently considering the facts, evidence, or legal submissions placed before him. 7.1. The entire reasoning of the CIT(A) is a verbatim reproduction of the Assessing Officer’s findings, without any application of independent judicial mind to the facts of the case. This approach is not only contrary to settled judicial principles but also undermines the role of an appellate authority, whose primary duty is to objectively assess the facts and provide a reasoned decision. 7.2. Most glaringly, the assessee had specifically submitted the ITAT’s order dated 14.10.2019, wherein the very basis of the penalty—the addition of Rs.12,18,000/-—was deleted. Despite this crucial piece of evidence, the CIT(A) chose to completely ignore it and proceeded to confirm the penalty in a perfunctory manner. This conduct is highly arbitrary and in gross violation of the principles of natural justice and disrespect to the orders passed by higher judicial Forums. 7.3. It is well established principle that an order which lacks reasoning and fails to deal with the submissions of the parties is liable to be set aside. Many judicial precedents also held that an appellate authority must pass a reasoned and speaking order considering all the facts on record. The present order of CIT(A) fails to meet this fundamental requirement of adjudication. ITA No.1964/Ahd/2024 Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 5 7.4. This Bench vide order dated 14.10.2019 in ITA No.2837/Ahd/2014, had already deleted the quantum addition of Rs.12,18,000/-, which formed the basis for the penalty under Section 271(1)(c) of the Act. This order was placed on record before the CIT(A), yet it was not even acknowledged in the impugned appellate order. It is trite law that when the very foundation of the penalty ceases to exist, the penalty itself cannot survive. 7.5. The manner in which the CIT(A) has handled this case raises serious concerns about the casual and mechanical approach adopted in discharging appellate functions. The CIT(A) is expected to act as an independent quasi- judicial authority and is duty-bound to pass a reasoned and speaking order addressing the contentions of both parties. However, in the present case, he has failed in this fundamental duty. We take strong exception to such an approach and direct that a copy of this order be forwarded to the Pr. Chief Commissioner of Income Tax (Pr. CCIT), Ahmedabad, for appropriate administrative review of such deficient appellate adjudication. Since the quantum addition has been deleted by the ITAT, the penalty under Section 271(1)(c) of the Act does not survive. The CIT(A)’s order is set aside as being perverse, arbitrary, and passed without application of mind. Penalty of Rs.1,13,900/- is deleted. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 31st January, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 31/01/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.1964/Ahd/2024 Electronic Instrumentation & Control Pvt.Ltd. vs. The ITO Asst. Year : 2011-12 6 आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT and Pr.CCIT 4. आयकर आयु& ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 30.12025 2. Date on which the typed draft is placed before the Dictating Member. : 30.12025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 31.1.25 7. Date on which the file goes to the Bench Clerk. : 31.1.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "