CHITRA JAIN, Jaipur V. Income Tax Officer ward 1(4), Jaipur, Jaipur

ITA 26/JPR/2023

AI Insights

The case involves Chitra Jain, the appellant, who contested the penalty imposed by the Income Tax Officer (ITO) under section 271(1)(c) of the Income Tax Act, 1961, for inaccuracies in her tax return for the assessment year 2014-15. The penalties were related to the disallowance of a claimed long-term capital loss and a deduction under section 54. Initially, the CIT(A) dismissed her appeal, considering it withdrawn under the VSVS scheme, which she had opted into. However, the ITAT found that the CIT(A) had not provided a proper opportunity for the assessee to be heard regarding the penalty on the long-term capital loss, which was not included in the VSVS settlement. Consequently, the ITAT restored the matter to the CIT(A) for a detailed examination and decision on this specific issue.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132266 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 19-01-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Opportunity of being heard; Tax effect; Wrong claim
• Section: 54; 6; 271(1)(c); 143(3); 5(2); 250

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 26/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2014-15 Chitra Jain Jaipur cuke Vs. Income Tax Officer Ward 1(4), Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AEAPJ 8934 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rajeev Sogani(CA) & Smt. Shivangi Samdhani (CA) jktLo dh vksj ls@ Revenue by : Smt Monisha Choudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 19/04/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 03/05/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 24/11/2022 [here in after (NFAC)/ ld. CIT(A) ] for assessment year 2014-15 which in turn arise from the order dated 02.03.2020 passed under section 271(1)(c) of the Income Tax Act, by ITO, Ward-1(4), Jaipur. 2 ITA No. 26/JP/2023 Chitra Jain vs. ITO 2. In this appeal, the assessee has raised following grounds: - “1. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in considering that the assessee disputed all the additions made by Id. AO in appeal and, accordingly, settled all the additions in Vivad se Vishwas Scheme. The action of the Id. CIT-(A) is illegal, unjustified, arbitrary and against the facts of the case. Appropriate relief may please be granted. 2. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in considering that penalty amounting to Rs. 4,23,226 was also eligible to be settled under Vivad se Vishwas Scheme. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Appropriate relief may please be granted. 3. In the facts and circumstances of the case and in law Id. CIT(A) has erred in deciding the matter without allowing the assessee proper opportunity of being heard on the premise that entire matter has been settled under Vivad se Vishwas Scheme and the assessee has requested to withdraw her appeal of imposition of penalty. The action of Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Appropriate relief may please be granted. 4. In the facts and circumstances of the case and in law Id. CIT(A) has erred in not deciding on merits whether penalty amounting to Rs. 4,23,226 has been validly imposed in the case of the assessee or not. The action of Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Appropriate relief may please be granted. 5. The assessee craves her rights to add, amend or alter any of the grounds on or before the hearing.” 3. Succinctly, the fact as culled out from the records is that the assessment was completed u/s 143(3) on 16.06.2016 at total income of Rs. 10,28,120/- against returned income of Rs. 2,79,140/-. The assessee during the period shown salary income of Rs. 1,85,362/- income from other sources Rs. 2,03,780/- and claimed loss of Rs. 14,10,754/- under long term capital gain head, thus shown gross total income of Rs. 3,89,142/- and after claiming deduction under chapter-VIA for Rs. 1,10,000/- it has shown total 3 ITA No. 26/JP/2023 Chitra Jain vs. ITO income of Rs. 2,79,142/-. The Assessing Officer during the assessment proceedings seen that the assessee in computation of income had claimed long term capital loss for Rs. 14,10,754/- in respect of a shop in Sunny Mart. In fact, the assessee shown sale consideration of Rs. 29,04,223/- towards the shop in Sunny Mart and claimed indexed cost at Rs. 43,14,977/-, this way she computed long term capital loss of Rs. 14,10,754/- (43,14,977 – 29,04,223) and mentioned in the ITR. The assessee during the proceedings vide her letter dated 06.06.2016 submitted that “Further to say in respect of capital gain there was transaction of Rs. 29,04,223.00 of Property at Shop No. 6, Sunny Mart, Jaipur has been shown erroneously as the deal was cancellation and whole amount paid in advance received back. The assessee submitted an affidavit with details in this regard and submitted that the assessee wrongly claimed (-) 14,10,754/- loss in the capital gain and the same was withdrawn and requested not to allow. Further, the AO disallowed claim of Rs. 7,48,979/- made by the assessee on account of section 54 of the I.T. Act, 1961. In fact, the assessee made investment in purchase of house in the name of her son Anubhav Jain and daughter in law Smt. Soni Jain and on this basis, deduction u/s 54 was claimed for Rs. 7,48,979/-. As the assessee made wrong claim and furnished inaccurate particulars in respect of above 4 ITA No. 26/JP/2023 Chitra Jain vs. ITO referred income therefore penalty proceedings u/s 271(1)(c) was initiated thereon vide notice dated 16.06.2016 for filing its reply by 18.07.2016 and got served by hand on 11.07.2016. It is clear that the assessee deliberately and willfully furnished inaccurate particulars by making wrong claim of Rs. 1,4,10,754/- and Rs. 7,48,979/- therefore the case found fit for imposing of penalty u/s 271(1)(c). Accordingly, I am satisfied with the facts hence, penalty u/s 271(1)(c) of the Act, 1961 to the tune of notional tax effect @ 30% of Rs. 14,10,754/- computes to Rs. 4,23,226/- and on wrong claim of deduction Rs. 7,48,979/- computes to Rs. 1,57,291/-, thus total penalty of Rs. 5,80,517/- was levied. 4. Aggrieved from the order of the penalty the assessee has preferred an appeal before the ld CIT(A). A propose to the grounds so raised the finding of the ld. CIT(A) is reproduced here in below: “6. As per the Direct Tax Vivid Se Vishwas Rules, the prescribed form for the purpose of Section 5(1) of DTVSV, 2020 is Form No. 3. The appellant has been issued Form No. 5 (Order for full and final settlement of tax arrears under section 5(2) read with section 6 of the Direct Tax Vivad Se Vishwas Act, 2020 (3 of 2020) the Direct Tax Vivad Se Vishwas Rules, 2020) on 13/10/2021 by the Pr. Commissioner of Income Tax, Mumbai-17. As mentioned above, Form No. 3 has been issued by the Designated Authority on 19/01/2021. Hence, in view of the provisions of Section 4(2) read with Section 5(2) of DTVSV, 2020 this appeal is deemed to have been withdrawn on 27/02/2021.” 5 ITA No. 26/JP/2023 Chitra Jain vs. ITO 5. The assessee has also preferred an appeal against the quantum order of ld. CIT(A) to the ITAT and against the penalty order before the ld. CIT(A) which in dispute before us. 6. During the pendency of these appeals the Direct Tax Vivad Se Viswas (VSVS) scheme was announced. As per the said scheme the assessee decided to opt for the scheme. Consequent to the said action of the assessee the quantum appeal of the assessee was dismissed as withdrawn. Even the penalty appeal of the assessee was also withdrawn on account of the fact that the assessee has preferred to settle the dispute under the VSVS scheme. The assessee aggrieved with the order of the ld. CIT(A) contending the ld. CIT(A) has not given the appropriate opportunity of being heard as the assessee has not settled the dispute of levy of penalty on the both the issues raised in the assessment order and in the order of the penalty. Based on these facts the assessee preferred this appeal on the grounds as stated in para 2 above. 7. To support the grounds so raised ld. AR of the assessee has submitted the following submission : 6 ITA No. 26/JP/2023 Chitra Jain vs. ITO “Assessment in the case of the assessee was completed u/s 143(3) vide order dated 16.06.2016. In the said assessment following disallowances led to addition to the total income: 1. Disallowance of Deduction u/s 54 of Rs. 7,48,979 2. Disallowance of Long Term Capital Loss of Rs. 14,10,754 Aggrieved by said assessment order the assessee filed appeal before Hon’ble CIT(A). The assessee challenged disallowance of deduction u/s 54 of Rs. 7,48,979 i.e. just first issue [PB 1-2]. The appeal of the assessee was dismissed and disallowance was confirmed [PB 3-15]. Thereafter, the assessee filed second appeal before Hon’ble ITAT and challenged the order of Hon’ble CIT(A). Again the assessee challenged disallowance of deduction u/s 54 of Rs. 7,48,979 i.e. just first issue [PB 16-18] Pending disposal of ITAT appeal, Vivad se Vishwas Scheme was announced. As per the scheme if appeal of the assessee was pending before ITAT as on 31.01.2020 the assessee was eligible to opt for the scheme. The assessee decided to opt into the scheme. As per the provisions of section 2(o) of DTVSV Act tax arrear means: (i) The aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax. Thus, the assessee could settled the disputed tax on account of disallowance of deduction u/s 54 and the penalty levied or leviable thereon. In the meantime penalty was imposed by ld. AO for both the issues amounting to Rs. 5,80,517 vide order dated 02.03.2020. Aggrieved by the said order also assessee preferred appeal before CIT(A). The assessee, accordingly, on 23.12.2020 filed Form 1 under DTVSV Act. As per the provisions of the Act only the issues which were taken up in the appeal (pending as on 31.01.2020) could be settled along with penalty and interest thereon. Thus, in the Form 1 the assessee indicated both the appeals- appeal before ITAT for quantum and appeal before ld. CIT(A) for penalty [PB 19]. The assessee mentioned in schedule IV disputed issue to be amount of deduction u/s 54 of Rs. 7,48,979 and disputed penalty of Rs. 1,57,291 (tax on Rs. 7,48,979) [PB 21]. Form 5 was also issued accordingly [PB 30]. The assessee did not mention about the penalty on second issue i.e. disallowance of Long Term Capital Loss of Rs. 14,10,754 in Form 1 as the appeal with regards to the same was not pending as on 31.01.2020. Hence, such penalty was alive and outstanding. Accordingly, in the appeal before ld. CIT(A) the assessee wanted to submit for deletion of such penalty. 7 ITA No. 26/JP/2023 Chitra Jain vs. ITO The assessee was issued just one notice dated 07.11.2022 providing that the window for CIT(A) for penalty appeal has been enabled [PB 33-34]. Since there was no date specified upto which reply was to be filed the assessee did not furnish any reply under a belief that another notice shall be issued. However, on 24.11.2022 directly an order was issued in the case of the assessee. Without providing assessee an opportunity of being heard the appeal of the assessee was deemed to be withdrawn stating that the assessee filed declaration under DTVSV Act. It is submitted that appeal for first issue stands withdrawn and assessee wishes to contest the second issue in appeal. The assessee never submitted that she has opted for entire penalty order under DTVSV Act in the appellate proceedings. Hence, the order passed u/s 250 by ld. CIT(A) is erroneous. The assessee may please be provided an opportunity of being heard either by fixing the case again to hear on merits or by setting it aside to the file of ld. CIT(A) with a direction to rehear the penalty on issue 2.” 8. Per contra, the ld. DR representing the revenue that since both the appeal of the assessee is settled in the VSVS scheme and final form is also issued in this case. She further relied upon the question no. 8 and Question no. 34 of the clarifications issued by the CBDT dated 22/04/2020 and thus submitted that since both the appeal of the assessee stands as withdrawn there cannot be a dispute with the assessee. 9. In the rejoinder the ld. AR of the assessee submitted that since the penalty was levied on the two issue and assessee has preferred to settle only one issue the revenue should not recover the demand related to the dispute which has not been settled by the assessee in VSVS and the 8 ITA No. 26/JP/2023 Chitra Jain vs. ITO penalty appeal of the assessee was dismissed as withdrawn without affording proper opportunity of being heard. 10. We have heard the rival contentions and perused the material placed on record. The bench noted that there were two issues on which the penalty was levied and the assessee has settled the dispute related to the one addition in VSVS. The ld. AR of the assessee also drawn our attention that she has filed an application for rectification of order passed u/s. 250 of the Act dated 24.11.2022 vide her application dated 28.03.2023 (APB page 37). Since the said application is not attended and looking to the concern of the assesses as prudent tax payer she has moved this appeal so as to ensure that if the revenue proceeded against here for recovery of the demand related to the addition which is not settled under the VSVS then she should get a chance to represent her case on merits. As the assessee being bonafide tax payer acted based on the advice of the consultant. The bench noted that the appellant was serious and interested in prosecuting the appeal in as much as she had already engaged tax consultant and made the payment of the filling of fees of appeal before the first appellate authority, she should get an equal chance to represent her case on merits before the ld. CIT(A). As the order of the ld. CIT(A) considered that the 9 ITA No. 26/JP/2023 Chitra Jain vs. ITO whole issue of levy of penalty is covered by VSVS scheme is not correct as argued by the ld. AR of the assessee. Considering the peculiar circumstances and facts as it emerges from the order of the lower authority that if the revenue peruse for the penalty demand of the assessee which is not covered under VSVS scheme then in that case the revenue before proceeding against the assessee the ld. CIT(A) should hear the case of the assessee on merits of dispute which is not settled in the VSVS scheme to that extent the order of the ld. CIT(A) is amended and restored to the file of the ld. CIT(A) for deciding the contentions of the assessee raised in the appeal afresh on merits after giving an opportunity of being heard to the assessee. The assessee is also directed to co-operate with the ld. CIT(A) in deciding the appeal on merits and without sufficient reason, not to take further adjournments. Before parting, we may make It clear that our decision to restore the matter back to the file of the ld. CIT(A) shall in no way be construed as having an reflection or expression on merits of the dispute, which shall be adjudicated by the learned Commissioner of Income Tax, (Appeals) independently in accordance with the law. In the result, appeal of the assessee is allowed for statistical purpose. 10 ITA No. 26/JP/2023 Chitra Jain vs. ITO Order pronounced in the open court on 03/05/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 03/05/2023 * Ganesh Kumar vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Chitra Jain, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward 1(4), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 26/JP/2023) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar