Monal Yashwantbhai Thakkar, Ahmedabad V. The DCIT.,Central Circle-1(1), Ahmedabad

ITA 176/AHD/2022

AI Insights

The case involves an appeal by Monal Yashwantbhai Thakkar against the order of the Commissioner of Income Tax (Appeals)-11, Ahmedabad, which confirmed the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2015-16. The penalty was based on additions made to the assessee's income, which were subsequently set aside by the ITAT in a prior quantum appeal, restoring the matter to the CIT(A) for fresh adjudication. The main contention of the assessee was that the penalty did not survive following the setting aside of the additions by the ITAT. The ITAT agreed with the assessee's position, noting that the issue of the validity of the assessment and the consequent additions were still pending before the CIT(A), and thus, the imposition of the penalty was premature.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133515 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 16-05-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Validity of assessment; Set aside
• Section: 271(1)(c); 143(3)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.176/Ahd/2022 Assessment Year : 2015-16 Monal Yashwantbhai Thakkar 19-20-21, 3 rd Floor Narayan Chambers B/h. Patang Hotel Ashram Road Ahmedabad 380 009. Vs. The DCIT, Cent.Cir.1(1) Ahmedabad. (Applicant) (Responent) Assessee by : Shri Parimalsingh B Parmar, AR Revenue by : Shri Sudhendu Das, CIT-DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 2 9 / 0 3 / 2 0 2 3 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 1 7 / 0 4 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld.Commissioner of Income Tax (Appeals)-11, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”] dated 28.2.2022 passed under section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]for the Asst.Year 2015-16 vide which the ld.CIT(A) confirmed action of the AO in imposing penalty under section 271(1)(c) of the Act. 2. The grounds raised are as under: i) The learned CIT(A) has erred in law and on facts in confirming action of AO in initiating and levying penalty under section 271(l)(c) of the Act without recording mandatory satisfaction as contemplated under ITA No.176/Ahd/2022 2 the Act at the time of framing the assessment for the year under consideration. ii) The learned CIT(A) has erred both in law and on the facts of the case in confirming the penalty of Rs.38,44,406/- levied u/s 271(l)(c) of the Act. iii) In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal. iv) In any case, quantification of the penalty is erroneous and excessive. v) Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.” 3. At the outset, the ld.counsel for the assessee submitted that the impugned penalty under section 271(1)(c) of the Act was imposed against the additions, which have been set aside by the ITAT in the quantum of the appeal of the assessee in ITA No.1736/Ahd/2018 dated 13.10.2021 for adjudicating the issue afresh. Therefore, since the issue of validity of assessment framed under section 143(3) and consequent quantification of additions are being restored back and pending before the first appellate authority, the impugned imposition of penalty under section 271(1)(c) does not survive and is to be set aside. The assessee has placed before a copy of the order of the ITAT dated 13.10.2021 restoring the issue of validity of assessment framed under section 143(3) of the Act. 4. On the other hand, the ld.DR has not contested this factual position of the matter. 5. We have heard rival submissions, gone through both the orders of the Revenue authorities. We have also gone through the order of the ITAT in the quantum appeal of the assessee dated ITA No.176/Ahd/2022 3 13.10.2021 (supra). We find that in the quantum appeal the assessee has raised the following grounds challenging the addition, based on which the Revenue authorities have imposed penalty under section 271(1)(c) of the Act. "1. The Ld. A. O. has erred in law and on facts computing income ofRs.24,40,300/-even though the appellant has provided all necessary explanations and details during the assessment proceedings. 2. The Id. AO has erred in law in expanding the limited scrutiny to complete scrutiny by going beyond the issue of verification by mismatch and expanding the scope of changing the head of income without seeking prior approval from the higher authority." On the issue of validity of assessment framed under section 143(3) as to whether the AO had obtained approval from the competent authority for assumption of jurisdiction by the AO in converting limited scrutiny to a detailed scrutiny, the ITAT has set aside order of the Revenue authority and restored the same to the ld.CIT(A) to decide the issue afresh as per the direction contained in the order at para-5. The para-5 of the order of the ITAT reads as under: “5. Heard both the sides and perused the material on record. The Id. CIT(A) had dismissed the appeal of the assessee holding that the contention of the assessee on the issue that the case was selected for limited scrutiny but the Assessing Officer made the detailed scrutiny which was beyond his power. In this connection, the Id. CIT(A) held that the limited scrutiny can be converted into full scrutiny with the approval of higher authorities and the assessee could not produce any evidences to show that approval from concerned authority was not taken. In this regard, we have perused the material on record and it is noticed that nowhere in the assessment record, the Assessing Officer has made any reference that any approval of the higher authority was taken for converting the case of the assessee from limited scrutiny to the detailed scrutiny. Under the circumstances, we opined that the decision of Id. CIT(A) is unjustified since the Id. CIT(A) has neither called any remand report from the Assessing Officer on the objection of the assessee regarding taking of approval from higher authority for converting limited scrutiny to the detailed scrutiny nor the Id. CIT(A) has given detailed reason along with the points for determination of his decision as prescribed in section 250(6) of the I.T. Act. Therefore, we are of the view that it ITA No.176/Ahd/2022 4 would be appropriate to restore this case of the assessee to the file of the Id. CIT(A) for adjudicating afresh after obtaining report from the Assessing Officer as discussed supra in this order. Therefore, we restore this case to the file of the Id. CIT(A) for adjudicating afresh as directed above. Accordingly, this gerund of appeal of the assessee is allowed for statistical purposes. 6. On due consideration of the facts and circumstances, and the submissions of both the parties, and the order of the ITAT cited (supra) we find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. In the present case, the assessee had filed appeal before the Tribunal against quantum addition in the year under consideration. The Tribunal vide order dated 13.10.2021 (supra) had remitted the issue back to the file of the ld.CIT(A) for reconsideration and no addition exists as of now, therefore, imposition of penalty at this stage is premature and not justifiable. Since the addition on quantum has been remitted to the file of the ld.CIT(A), we also remit the issue regarding levy of penalty to his file for reconsideration based on the outcome in set aside proceedings pending before him. In other words, the ld.CIT(A) shall decide the issue regarding levy of penalty based on the outcome of his order in pursuance of Tribunal’s order cited (supra) in the assessee’s quantum appeal. 7. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the Court on 17 th April, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 17/04/2023