DILIP BHAGWAT PIMPLE, Pune V. Income Tax Office, Ward-14(1), Pune, Pune

ITA 532/PUN/2023

AI Insights

The case involves Dilip Bhagwat Pimple, the appellant, who challenged the penalty imposed by the Income Tax Officer under section 270A of the Income-tax Act, 1961, for alleged misreporting of income related to the sale of immovable property. The National Faceless Appeal Centre (NFAC) had confirmed the penalty without first adjudicating the appeal against the quantum addition on merits, which was dismissed for non-condonation of delay. The Tribunal held that the penalty could not be imposed without first determining the correct quantum of income, as the penalty is essentially an additional tax and should be based on a confirmed tax liability.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136260 (ITAT-PUNE)
• Duration Of Justice: 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 02-05-2023
• Other Referred Cases: CIT Vs Bikaji Dadabhai & Co., Jain Brothers Vs Union of India, CIT v. Maskara Tea Estate
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: FILING AN APPEAL
• Keywords: Principle of natural justice
• Section: 250

Judgement Text

॥ आयकर अपीलीय न्यायाधिकरण, पुणे “ए” न्यायपीठ, पुणे में ॥ ITAT-Pune Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE “A” BENCH, PUNE BEFORE HON’BLE SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 0532/PUN/2023 निर्धारण वर्ा / Assessment Year : 2017-18 Dilip Bhagwat Pimple 544, Keshav Nagar, Mundhwa, Pune-411036 PAN:AIFPP6866J . . . . . . . अपऩलधथी / Appellant बनाम / V/s. Income Tax Officer, Ward-14(1), Pune. . . . . . . .प्रत्यथी / Respondent द्वारा / Appearances Assessee by : Shri Saurabh Patil Revenue by : Shri Ramnath Murkunde सपिवधई की तधरऩख / Date of conclusive Hearing : 26/05/2023 घोर्णध की तधरऩख / Date of Pronouncement : 14/06/2023 आदेश / ORDER PER G. D. PADMAHSHALI, AM; By the present appeal the assessee challenges the order of National Faceless Appeal Centre [for short ‘NFAC’] dt. 29/03/2023 passed u/s 250 of the Income-tax Act, 1961 [for short ‘the Act’] for the assessment year 2017-18 [for short ‘AY’] Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 2 of 8 2. This appeal deals with the legitimacy of action of first appellate authority in confirming levy of penalty u/s 270A of the Act when appeal against quantum is dismissed otherwise than on merits on even date. 3. We have heard the learned counsel for the assessee Mr Saurabh Patil and Ld. Ramnath Murkunde representing respondent Revenue at length and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short ‘ITAT- Rules’] perused the material placed on records and duly considered the facts in the light of settled legal position which are forewarned to parties present and ceased following facts from the case records; 3.1 During the previous year relevant to AY under consideration the assessee found to have sold an immovable property for sum of ₹35.74Lakhs, in event of assessee’s failure to substantiate the cost of acquisition and indexed Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 3 of 8 cost of property sold, the Ld. National Faceless Assessment Centre [for short ‘AO’] disallowed the same and assessed the total income of the assessee at ₹44,54,040/- u/s 144 of the Act as against the returned income of ₹8,80,040/-. 3.2 Consequent to aforestated assessment, the Ld. AO initiated penal proceedings u/s 270A by service of notice dt. 11/12/2019 & 22/05/2021 and called upon the assessee to show case as to why a penalty in his case should not be levied for mis- reporting of income. When notices remained unresponded, the Ld. AO culminated the proceedings by imposing a penalty @200% of tax sought to be evaded i.e. ₹2,14,440/- holding it as mis-reporting of income straightway. 3.3 In so far as the quantum addition is concerned, the assessee agitated the denial of credit for cost/indexed cost of acquisition of property before the first appellate authority. Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 4 of 8 However the Ld. NFAC vide its order dt. 29/03/2023 dismissed the appeal in limine for non-condonation of delay. When the matter travelled to this Tribunal in ITA No. 533/PUN/2023, the Co-ordinate bench considering the fact that the utmost part of delay in instituting appeal was attributable to COVID-19 pandemic and as such is saved by the provisions of TOLA, 2020 has remanded the matter back to the file of Ld. NFAC for de-nova adjudication on merits. 3.4 The levy of penalty u/s 270A of the Act was also assailed by the assessee by filing an appeal before first appellate authority. The Ld. NFAC by an impugned order of even date i.e. 29/03/2023 upheld the action of Ld. AO in imposing the penalty u/s 270A of the Act. 3.5 The assessee in this appeal alleged the action of Ld. NFAC for confirming levy of penalty prematurely without first dealing with the quantum appeal on merits as violative of natural justice. Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 5 of 8 4. In adjudicating the issue under consideration, without reproducing the provisions of section 270A of the Act, it shall be purposive to state that, from AY 2017-18 the AO, CIT, CIT(A) and PCIT are severally empowered at a discretion to initiate and levy a penalty @50% and @200% of tax sought to be evaded respectively on under-reported income and when such under-reported income is in consequence of mis-reporting. The bare reading of this provision intractably demands for determination of under- reporting and mis-reporting of income prior to levy of any penalty u/s 270A of the Act. That is to say, the determination of under-reporting and misreporting of income must precede the levy of penalty and in the absence of any such determination of under- reporting or/and mis-reporting of income the jurisdiction to initiate penal proceedings u/s 270A of the Act fails. Thus the determination of default trigger the imposition of penal action cannot succeed over levy of penalty. Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 6 of 8 5. In the extant case, we note that, the appellant assessee preferred two appeals before Ld. NFAC i.e. one against quantum addition and second appeal against levy of penalty arisen out of such quantum addition. The Ld. NFAC exercising the co-terminus power over the subject matter of quantum addition and levy of penalty has dismissed the quantum appeal of the appellant in limine for non- condonation of delay by an order dt. 29/03/2023 and whereas confirmed the penalty levied by the Ld. AO by the impugned order of even date. This leaves us with the question ‘as to whether the action of the Ld. FAA confirming the penalty prematurely without first dealing the quantum appeal is bad in law and violative of principle of natural justice?’ 6. In first place, it shall be purposive to quote that, ‘a penalty is levy of additional tax’ as held by the Hon’ble Supreme Court in ‘CIT Vs Bikaji Dadabhai & Co.’ reported 42 ITR 123 which Hon’ble Lordships Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 7 of 8 subsequently reiterated in ‘Jain Brothers Vs Union of India’ reported in 77 ITR 107. Thus in the light of aforestated ratio, we are heedful to state that, the Ld. FAA without first adjudicating the quantum appeal that is to say without first determining the basic tax has proceeded to determine the additional tax in the form of penalty u/s 270A. That is to say the Ld. FAA tried to build floors in the air without first laying down the foundation on the earth. 7. The sound general rule that, no penalty can be levied on any doctrine of ‘the substance of the matter’ as distinguished from its legal signification, as a subject is not liable to penalty on ‘supposed spirit of law or by inference or by analogy’. In this context it is worthy to quote from the observation of Hon’ble Guwahati High Court made at para 7 in ‘CIT v. Maskara Tea Estate’ reported 130 ITR 955 that; Lord Summer observed in Ormand Investment Co. v. Betts [(1928) AC 143] "the Crown does not tax by analogy but by statute." Dilip Bhagwat Pimple ITA No. 532/PUN/2023 AY:2017-18 ITAT-Pune Page 8 of 8 8. The penalty proceedings are penal in nature and character hence attracted only when contravention of statutory obligations as contemplated by the Act is established beyond an iota of doubt. However in the present case, the adjudication confirming the levy of penalty preceded over pending adjudication of quantum appeal which in our considered opinion amounted to levy of penalty on ‘supposed spirit of law or by inference or by analogy’ which is bad in law and violating of natural justice, for the reasons, we have no hesitation in setting-aside the impugned premature penalty adjudication. 9. Resultantly, the appeal stands ALLOWED. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Wednesday 14th day of June, 2023. -S/d- -S/d- S. S. VISWANETHRA RAVI G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE; दिन ांक / Dated : 14 th day of June, 2023. आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT Circle-6, 4. The NFAC, New Delhi. 5. The DR, ITAT, “A” Bench, Pune 6. ग र्डफ़ इल / Guard File. आिेश नुस र / By Order, वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्य य दिकरण, पुणे / ITAT, Pune.