GOVARDHAN NAIDU CHINTAKUNTA,HYDERABAD V. ITO., WARD - 1, PRODDUTUR

ITA 435/HYD/2025

AI Insights

The case involves an appeal by the assessee, Govardhan Naidu Chintakunta, against the penalty imposed under section 271AAA of the Income Tax Act, 1961, by the Assessing Officer (A.O.) and upheld by the Commissioner of Income-Tax (Appeals) (CIT(A)). The penalty was imposed following search and seizure operations that revealed unexplained cash and investments. The CIT(A) initially dismissed the appeal for non-prosecution, which the assessee contested, leading to this appeal before the Tribunal. The Tribunal found that the CIT(A) erred in dismissing the appeal without addressing the specific grounds raised by the assessee and directed a re-examination of the case on merits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126256 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2011-2012
• Other Referred Cases: Benny D' Souza and Others Vs. Melwin D' Souza and Others, CIT, Madras Vs. S. Chennappa Mudaliar, CIT Vs. Premkumar Arjundas Luthra (HUF)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Unexplained investment; Capital Gains; Search and seizure
• Section: 143(3); 142(1); 250; 251; 13; 246A

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad श्री रवीश सूद, माननीय न्याययक सदस्य एवं श्री मिुसूदन सावडिया, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.435/Hyd/2025 (निर्धारण वर्ा/ Assessment Year:2011-12) Govardhan Naidu Chintakunta, Hyderabad. PAN : ADDPC6489M The Income Tax Officer, Ward – 1, Proddutur. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri P. Murali Mohan Rao, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Y. Srikanth Reddy, Sr.DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 21.04.2025 घोर्णध की तधरीख/Date of Pronouncement : 23.04.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), Hyderabad – 11, dated 20.01.2025, which in turn arises from the 2 ITA No.435/Hyd/2025 order passed by the Assessing Officer (for short “A.O.”) u/s 271AAA of the Income Tax Act, 1961 (for short “the Act”) dated 16.03.2021. The assessee has assailed the impugned order on the following grounds of appeal before us : “1. The penalty order passed by the Ld. CIT(A) under section 271AAA is erroneous both on facts and in law to the extent the order is prejudice to the interest of the appellant. 2. The Ld. CIT(Appeals) erred in dismissing the appeal on the Ground of non prosecution. 3. The Ld. CIT(A) erred in considering that an appeal against the assessment order is pending in CIT(A) for disposal and we expect a favourable disposition towards assessee. 4. The Ld. CIT(A) ought to have appreciated the fact that no penalty u/s 271AAA is leviable when the addition was made on legal and debatable issues. 5. The Ld. CIT(A) ought to have appreciated the fact that AO erred in passing order u/s 271AAA of the Act by levying penalty of Rs. 3,36,330/- when the appellant has neither resorted to concealment of any particulars of income nor furnished inaccurate particulars of income but simply based on the estimated legal additions made in the assessment order. 6. The Ld. CIT(A) ought to have appreciated the fact that A.O erred in levying penalty by passing order u/s 271AAA, of the Act when the appellant has not resorted to any wilful attempt to conceal any portion of its income or to evade tax. 7. The Ld. CIT(A) ought to have appreciated the fact that penalty proceedings and assessment proceedings are two independent proceedings and that the penalty order cannot be solely based on the reasons given in assessment order, without conclusively establishing the assessee intent to evade any portion of its income. 8. The CIT(A) has erred in holding that the appellant is deemed to have no grievance against the orders passed by the A.O.” 3 ITA No.435/Hyd/2025 2. Search and seizure operations were conducted on the assessee on 25-11-2010. The assessee in response to a notice issued under Section 142(1) of the Act filed his return of income for A.Y. 2011-12 on 07-03-2012, declaring an income of Rs.2,43,360/- and agricultural income of Rs.3,12,540/-. The A.O. thereafter, framed the assessment vide his order passed under Section 143(3) of the Act dated 25-03-2013 determining the total income at Rs.39,19,178/-, including agricultural income of Rs. 3,12,540/- after making certain additions, viz., (i) Capital gain from sale of immovable property: Rs.13,73,303/-; (ii) Unexplained cash found from the assessee’s residential premises during the course of search proceedings: Rs. 3,88,000/-; and (iii) Unexplained investment in jewellery: Rs. 16,01,975/-. 3. On further appeal, the Tribunal remitted the matter relating to the Long-Term Capital Gain (“LTCG”) arising from the sale of immovable property to the file of CIT(A) with a direction to adjudicate the addition made in the hands of the individual assessee, along with the case of the HUF, where the addition was made on a substantive basis. The CIT(A) held that the assessment of investment and capital gains on the sale of immovable property 4 ITA No.435/Hyd/2025 was to be brought to tax on a substantive basis in the hands of the individual assessee. 4. Thereafter, the A.O. observing that the assessee had concealed the payment of certain cash advances and the acquisition of land, for which no source was explained with supporting evidence, thus, imposed penalty of Rs.3,36,328/- u/s 271AAA of the Act. 5. Aggrieved, the assessee assailed the penalty imposed by the A.O. u/s 271AAA before the CIT(A). As the assessee despite having been afforded 13 opportunities, had failed to participate in the proceedings before the first appellate authority, therefore, the latter holding a conviction that the assessee was not interested in pursuing the appeal, dismissed the same for want of prosecution. For the sake of clarity, the observations of the CIT(A) are culled out as under : 5 ITA No.435/Hyd/2025 6 ITA No.435/Hyd/2025 7 ITA No.435/Hyd/2025 6. The CIT(A) while dismissing the appeal for want of prosecution, had drawn support from the judgment of the Hon'ble Supreme Court in the case of Benny D’ Souza and Others Vs. Melwin D’ Souza and Others, Special Leave to Appeal(C) No(s) 23809/ 2023, dated 24.11.2023. 8 ITA No.435/Hyd/2025 7. Being aggrieved, the assessee has carried the matter in appeal before us. 8. We have heard the learned Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. 9. Shri P. Murali Mohan Rao, the learned Authorized Representative (for short the “ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that as the quantum appeal in the case of the assessee, pursuant to remitting of the matter by the Tribunal to the file of the CIT(A), is pending adjudication, therefore, in all fairness, the matter be restored to the file of the CIT(A) with a direction to adjudicate the same after disposing off the quantum appeal. Alternatively, the ld.AR submitted that, as the CIT(A) had dismissed the appeal for non- prosecution and grossly erred in law and on the facts of the case by not adverting to and adjudicating the specific grounds on which the impugned order was assailed before him, therefore, for the said reason also the order passed by him cannot be sustained and is liable to be vacated. 9 ITA No.435/Hyd/2025 10. Per contra, Shri Y. Srikanth Reddy, the learned Senior Departmental Representative (for short the “Ld. DR”) relied on the orders of the lower authorities. 11. We have thoughtfully considered the contentions advanced by the learned Authorized Representatives of both the parties qua the penalty imposed by the A.O. u/s 271AAA. Apropos, the Ld. AR's claim that the assessee’s quantum appeal, pursuant to the same having been remitted by the Tribunal to the file of CIT(A), is pending adjudication, we are unable to persuade ourselves to subscribe to the same. Ostensibly, the CIT(A), while disposing of the appeal against the order passed u/s 271AAA, had specifically observed that the assessment of investment and capital gains on the sale had to be considered on a substantive basis in the hands of the individual assessee. 12. Be that as it may, we find that the CIT(A) had dismissed the appeal simply for want of prosecution without adverting to the specific issues based on which the impugned penalty order was assailed before him. Although, it is a matter of fact borne from the record that the assessee, despite having been afforded 13 10 ITA No.435/Hyd/2025 opportunities, had failed to participate in the proceedings before the first appellate authority, but the same would in no way justify dismissal of the appeal for want of prosecution without adverting to and adjudicating the specific grounds based on which the impugned order was assailed by the assessee/appellant before him. In so for as the judgment of the Hon'ble Apex Court in the case of Benny D’ Souza and Others Vs. Melwin D’ Souza and Others (supra) is concerned, we are of the view that as the same is distinguishable on the facts, therefore, the same would not carry the case of the Revenue any further. The issue before the Hon'ble Apex Court in the he aforesaid case was as to whether or not the Hon'ble High Court in the backdrop of Order XLI, Rule 17 of the Code of Civil procedure (CPC) was justified in law and on facts of the case in dismissing the appeal on merits for non-prosecution by the assessee/appellant. The Hon'ble Apex Court by referring to “Explanation” to Rule 17 (supra), had observed that the same categorically provides that if the appellant does not appear before the Court when the appeal is called for hearing, then it can only be dismissed for non-prosecution and not on merits. At this stage, we deem it fit to cull out Order XLI, Rule 17 of CPC as had been 11 ITA No.435/Hyd/2025 looked into by the Hon'ble Apex Court in its aforesaid order, as under : \"17. Dismissal of appeal for appellant's default :- (1) Where on the day fixed, or on any other day to which the hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Court may make an order that the appeal be dismissed. Explanation - Nothing in this sub-rule shall be construed as empowering the Court to dismiss the appeal on the merits.\" (emphasis supplied by us) 13. Ostensibly, as the aforesaid Rule 17(supra) is applicable to the proceedings before a “Court”, therefore, we are of a firm conviction that the same cannot be applied qua the proceedings before the CIT(A) which is a quasi-judicial authority. Rather, we find that the Hon'ble Supreme Court in the case of CIT, Madras Vs. S. Chennappa Mudaliar 1969 SCC (1) 591, while interpreting Section 33(4) of the Income Tax Act, 1922, had held, that the appellate tribunal is bound to give a proper decision both on question of fact as well as law, which can only be done if the appeal is disposed off on merits and not dismissed owing to the absence of the appellant. 12 ITA No.435/Hyd/2025 14. Apart from that, our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon’ble High Court had observed as under: \"8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.” 13 ITA No.435/Hyd/2025 15. We thus, in terms of our aforesaid observations, set aside the matter to the file of CIT(A) with a direction to re-decide the appeal vide a speaking order. Needless to say, the CIT(A) shall in the course of set aside proceedings afford a reasonable opportunity of being heard to the assessee. 16. Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the Open Court on 23rd April, 2025. Sd/- (श्री मिुसूदन सावडिया) (MADHUSUDAN SAWDIA) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 23.04.2025. #*TYNM/sps 14 ITA No.435/Hyd/2025 आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Govardhan Naidu Chintakunta, 4/61, Potladurthi, Verraguntla – 516309, Andhra Pradesh, India. C/o. P. Murali & Co., Chartered Accountants, 6- 3-555/2/3, Somajiguda, Hyderabad. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward – 1, Proddutur. 3. The Principal Commissioner of Income Tax, Kurnool. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad "