Ramesh P Mehta Vs ITO (ITAT Surat)
Income Tax Appellate Tribunal (ITAT) Surat has remanded the penalty proceedings under Section 271B of the Income Tax Act, 1961, to the Assessing Officer (AO) for fresh consideration in the case of Ramesh P. Mehta vs. ITO. The appellant contested the penalty imposed for alleged failure to comply with tax audit requirements. ITAT found merit in the assessee’s argument that the AO had wrongly treated all bank transactions as turnover for penalty purposes. The matter was sent back for reassessment, following principles of natural justice.
The appeals pertained to Assessment Years 2011-12 to 2013-14, where the Commissioner of Income Tax (Appeals) [CIT(A)] had upheld the AO’s penalty orders. The assessee contended that they were not provided a proper opportunity to be heard. The Tribunal also considered a delay of 51 days in filing the appeal but condoned it, citing the assessee’s lack of familiarity with tax laws and the principle of substantial justice. The Tribunal emphasized that procedural technicalities should not prevent a fair hearing.
A key contention in the case was whether total bank transactions could be treated as turnover to justify a penalty under Section 271B. The ITAT referred to its previous ruling in the assessee’s quantum assessment (ITA Nos. 479-481/SRT/2023), where it had restored the assessment back to the AO. Applying the same rationale, the Tribunal ruled that penalties could not be imposed solely on bank credits without properly determining the actual turnover.
Considering that the main assessment had already been sent back for fresh adjudication, ITAT deemed it appropriate to restore the penalty proceedings to the AO as well. The Tribunal instructed the AO to reassess the penalty only after completing the fresh assessment. This ruling highlights the importance of correctly interpreting financial transactions before imposing penalties under tax laws.
FULL TEXT OF THE ORDER OF ITAT SURAT
This group of three appeals by individual assessee are directed against the separate orders of National Faceless Appeal Centre, Delhi /Commissioner of Income Tax (Appeals) [for short to as “Ld.CIT(A)”] all dated 27.10.2023 for assessment years (AYs) 2011-12 to 2013-2014. The ld CIT(A) confirmed penalty levied by Assessing Officer (AO) under section 271B in assessment years 2011-12 to 2013-14. In all appeals, the assessee has raised identical grounds of appeals, facts in all appeals are common. Therefore, with the consent of both the parties, all the appeals were clubbed, heard together and are decided by common order to avoid conflicting decision. For appreciation of fact, appeal for A.Y. 11-12, in ITA No.163/SRT/2024 is treated as “lead” case. The assessee has raised the following grounds of appeal:-
“1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in passing ex parte order without giving reasonable and sufficient opportunity of being heard.
2. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer by imposing a penalty of Rs.150000/-.
3. It is therefore prayed that above addition made by the Assessing Officer and confirmed by CIT(A) may please be deleted.
4. The appellant craves leave to add or alter or delete any of the ground or grounds of appeal at the time of the hearing before Your Honour.”
2. At the outset of hearing, Ld. Authorized Representative (Ld.AR) of the assessee submits that there is delay of 51 days in all the appeals before the tribunal. The Ld. AR of the assessee submits that delay in filing appeals are neither intentional nor deliberate. The Ld. AR of the assessee submits that assessee is a common person and not conversant with Income Tax Laws, and he was of the view that if appeal filed against the tax demand order than no need to file separate appeal for penalty orders. The Ld. AR submits that as per direction of tax consultant assessee filed appeal before Tribunal, for which delay occurred. The ld AR of the assessee submits that there is no inordinate delay in filing appeal. The assessee is not going to be benefitted in filing appeal belatedly. The assessee has a good case on merit and is likely to succeed if the appeals are heard on merit.
3. On the other hand, Ld. Senior Departmental Representative (Ld. Sr-DR)for the Revenue submits that in the application for condonation of delay, assessee has not disclosed reasonable and plausible cause for condoning the delay. The assessee has given a very vague explanation. The assessee has made a self-serving statement that the delay is not intentional. The Ld. Sr-DR for the Revenue submits that the delay should not be condoned as the assessee has not disclosed reasonable and plausible cause.
4. We have considered the preliminary submissions of both the parties and perused the record carefully. On the plea of delay, we find that the Ld.AR of the assessee has vehemently submitted that there was no intentional or deliberate delay rather the delay is for the reasons that the assessee is a common person and not conversant with Income Tax Laws. The Ld AR of the assessee also submitted that the assessee has good case on merit. On considering the submission of assessee and facts of the case, we are of the view that the delay in filing all the appeal before Tribunal is not deliberate or intentional or gross negligence on part of assessee, therefore, considering the principle that when technical consideration and cause of substantial justice are pitted against each other, the cause of substantial justice may be preferred, therefore we find that the explanation given by assessee for condonation of delay is reasonable one. Hence, the delay in filing all appeals are condoned. Now adverting to the merit of the case.
5. Rival submission of both the parties have been heard and record perused. The Ld.AR for the assessee submits that addition made in the quantum assessment has already been restored back to the file of Assessing Officer by this tribunal in ITA Nos. 479, 480 and 481/SRT/2023 vide order dated 26.10.2023, therefore the penalties may also be restored back to the file of Assessing Officer passing fresh order. The Ld. AR of the assessee further submits that Assessing Officer has wrongly arrived at a figure of turnover for imposing penalty under section 271B. The Assessing Officer considered all transactions in bank accounts which can never be considered as total turnover for imposing penalties. The penalty was imposed without giving opportunity of being heard to assessee. The penalty was levied in violation of principle of natural justice.
The Ld. AR of the assessee submits that this appeal may also be restored to the file of Assessing Officer to decide it afresh after passing assessment order in terms of order of this Tribunal. He has also filed copy of decision of this Tribunal in quantum assessment, which is kept in record.
6. On the other hand, ld. Sr-DR for the Revenue supported the order of lower authorities. The ld SR DR for the revenue prayed for dismissal of all the appeals.
7. We have considered the rival submissions of both the parties and have gone through order of lower authorities carefully. We find that the addition in the quantum assessment has already been restored back to the file of Assessing Officer in order dated 26.10.2023 in ITA Nos.479 to 481/SRT/2023. We also find merit in the submission of Ld. AR of the assessee that entire bank transactions cannot be considered as a turnover of the assessee for the purpose of levying penalty under section 271B of the Act. Thus, considering the fact that addition made in quantum assessment has already been restored back to the file of Assessing Office by the order of this Tribunal (supra). Therefore, we deem it appropriate to restore all the appeal back to the file of Assessing Officer to decide the matter afresh after passing assessment order.
8. In the result, assessee’s appeal ITA No.163/SRT/2024 is allowed for statistical purposes.
9. Now we take ITA No.164-165/Srt/2024 for assessment years 2012-13 and 2013-14. Since we have already restored the matter back to the file of Assessing Officer in ITA No.163/Srt/2024, therefore, these appeals are also restored back to the file of Assessing Officer for deciding the issue afresh.
10. In the result, both the appeals of assessee are allowed for statistical purposes.
11. In combined result, all the three appeals of assessee are allowed for statistical purposes in above terms. Registry is directed to place one copy of this order in all appeals folder / case file(s).
Order pronounced in the open court on 31/12/2024.
