IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH “A”, LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
ITA No.209/LKW/2012
Assessment Year:2004-05
Income Tax Officer-II
Faizabad
v.
(Appellant)
Appellant by:
Respondent by:
Date of hearing:
Date of pronouncement:
Smt. Suman Srivastava
Naka Bye Pass
Faizabad
TAN/PAN:BBOPS8766D
(Respondent)
Shri. Rajnish Yadav, D.R.
Shri. Abhinav Mehrotra, Advocate
27 11 2014
13 01 2015
ORDER
PER SUNIL KUMAR YADAV:
This appeal is preferred by the Revenue against the order of the
ld. CIT(A) deleting the penalty levied under section 271(1)(c) of the
Income-tax Act, 1961 (hereinafter called in short “the Act").
2.
The ld. D.R. has placed reliance upon the penalty order; whereas the
ld. counsel for the assessee, beside placing reliance upon the order of the
ld. CIT(A), has invited our attention that the assessment order was passed
under section 147 read with section 144 of the Act and made addition
under different heads. Though an appeal was filed before the ld. CIT(A) in
quantum, but it was also decided ex-parte, as none appeared on behalf of
the assessee. Consequently penalty under section 271(1)(c) of the Act was
levied. Even the penalty order was also passed ex-parte, against which an
appeal was filed before the ld. CIT(A), but none appeared before the ld.
CIT(A).
The ld. CIT(A), however, examined the reasonableness in the
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penalty levied by the Assessing Officer and he was of the view that since
the assessment was the best judgment assessment and the assessee was
not allowed to furnish explanations with regard to the claim made by her,
penalty under section 271(1)(c) of the Act is not leviable. The relevant
observations of the ld. CIT(A) are extracted hereunder:-
“2. While levying the penalty u/s 271(1)(c) of the Act, the AO has
treated an amount of Rs. 24',65,409/- as income concealed by the
assessment. As mentioned in the order, the said amount of Rs.
24,65,409/- consisted of the following actions/disallowances made in
the assessment:(i) Addition on account of opening balance of capital
Rs.12,86,483/-
(ii) Additional to furniture and fixture treated as unexplained
Investment
(iii) Addition on building account treated as unexplained
Rs.36,240/Rs. 11,42,686/-
2.1 It is further seen that these additions were made in the
assessment which was completed u/s 144 of the Act. The AO has
not mentioned as to whether or not the appellant disputed the
assessment in appeal and if so what was the outcome of such
appeal. Thus all the additions made in an exparte assessment have
been treated as concealed income. It is also seen that the AO has
levied the penalty because the notice issued on 13.05.2008 was not
responded by the assessee.
3. On careful consideration, I find that the AO has treated the
additions made in the assessment as ipso facto constituting the
concealed income. He has not established as to how the additions
made on the subjective perception of AO could constitute concealed
income so as to entail penalty u/s 271(1)(c) of the Act. While an
addition made might hold good for the purposes of assessment it
cannot be held to constitute, on that very premise, the concealed
income. The AO has also not established that the explanation if any,
furnished by the appellant was found to be false. Apparently it is a
case where no explanation was furnished and an explanation not
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furnished could not proved to be false. I, therefore, do not find any
justification for the levy of penalty in this case and the penalty levied
is directed to be cancelled.”
3.
The ld. counsel for the assessee has further invited our attention that
though in quantum appeal before the ld. CIT(A) assessee has not raised a
plea with regard to the validity of assessment framed under section 147
read with 144 of the Act, but the penalty proceedings are independent
proceedings in which validity of the assessment framed consequent to the
notice issued under section 148 of the Act can be questioned and can also
be examined by the concerned authorities.
The ld. counsel for the
assessee has further invited our attention to the assessment order in which
it has been mentioned by the Assessing Officer that notice under section
148 of the Act was issued and duly served upon the husband of the
assessee, meaning thereby notice under section 148 of the Act was never
served upon the assessee.
It is also not clear from the order of the
Assessing Officer whether the husband of the assessee was authorized to
receive notice under section 148 of the Act from the Assessing Officer on
behalf of the assessee.
In the absence of all these facts, it cannot be
assumed or presumed that notice under section 148 of the Act was duly
served upon the assessee, which is a requirement under the law for
reopening the assessment under section 147 of the Act. Once it is held
that notice under section 148 of the Act is not served upon the assessee,
the assessment framed consequent thereto deserves to be annulled and in
that situation, penalty under section 271(1)(c) of the Act is also not
sustainable in the eyes of law.
4.
The ld. D.R. in rebuttal has submitted that the husband of the
assessee has been participated in the assessment proceedings and penalty
proceedings on behalf of the assessee. Therefore, validity of assessment
framed under section 147 read with 144 of the Act cannot be questioned
before the second appellate authority.
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5.
Having given a thoughtful consideration to the rival submissions and
from a careful perusal of the orders of the authorities below, we find that
there is force in the arguments of the ld. counsel for the assessee, as
nothing is borne out from the assessment order that notice under section
148 of the Act was ever served upon the assessee. It is also evident from
the orders of the lower authorities that the assessee never appeared either
before the Assessing Officer or before the first appellate authority, either in
the quantum proceedings or penalty proceedings under section 271(1)(c) of
the Act. Even in the penalty proceedings, none appeared on behalf of the
assessee before the ld. CIT(A).
It is also an undisputed fact that
assessment is a best judgment assessment and with regard to the best
judgment assessment, it has been held by the Hon'ble jurisdictional High
Court in the case of CIT vs. Nepani Biri Co. Trust, 55 Taxman 328 that
where disallowance of various items claimed by the assessee are made in
best judgment assessment and higher income was assessed, penalty under
section 271(1)(c) of the Act should not be levied.
The relevant
observations of the Hon'ble High Court are extracted hereunder:-
“On appeal, the AAC deleted in additions to a very large extent. On
second appeal, the Tribunal gave further relief. The income of the
assessee finally determined stood at Rs.2,22,017. The difference
thus, between the income returned and the income assessed was
Rs.1,36,561. This sum represented various expenses claimed by the
assessee but disallowed by the ITO. Proceedings for penalty under
section 271(1)(c) of the Act were taken. The IAC levied a penalty of
Rs.1,90,000 on the assessee. On appeal, however, the Tribunal found
that no penalty was leviable inasmuch as there was no concealment
of income or wilful negligence on the part of the assessee. It opined
that certain expenses claimed by the assessee were disallowed by
the ITO which led to the difference between the income returned and
the income assessed and that in such circumstances the penalty
under section 271(1)(c) could not be levied. We see no reason to
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differ from the view taken by the Tribunal which is in accordance
with the facts of the case.”
6.
In the case of CIT vs. Krishi Tyre Retreading & Rubber Industries, 44
taxmann.com 9, the Hon'ble Rajasthan High Court has held that where
addition had been sustained purely on estimate basis and no positive fact
or finding had been found so as to even make said addition, no penalty was
leviable under section 271(1)(c) of the Act.
7.
Keeping in view the totality of the facts and circumstances of the
case, we are of the considered opinion that the assessment framed under
section 144 of the Act is best judgment assessment without service of valid
notice under section 148 of the Act upon the assessee.
Though in
quantum, the additions were sustained but for those additions penalty
under section 271(1)(c) of the Act cannot be levied, as before levying
penalty, it has to be established that either the assessee has concealed the
particulars of income chargeable to tax or has furnished inaccurate
particulars. In the light of this proposition, we have examined the order of
the ld. CIT(A) and we find no infirmity therein. Accordingly we confirm his
order.
8.
In the result, appeal of the Revenue stands dismissed.
Order was pronounced in the open court on the date mentioned on
the captioned page.
Sd/[A. K. GARODIA]
ACCOUNTANT MEMBER
DATED:13th January, 2015
JJ:1812
Copy forwarded to:
Sd/[SUNIL KUMAR YADAV]
JUDICIAL MEMBER
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1.
2.
3.
4.
5.
Appellant
Respondent
CIT(A)
CIT
DR
Assistant Registrar