Case Law Details
Hirabai & Hormusji Jiwanivakil Model School Trust Vs ITO (Exemption) (ITAT Mumbai)
Ex Parte Dismissal Set Aside – Tribunal Sends 271(1)(b)Penalty Case Back to CIT(A)- Assessment Pending, Penalty Appeal Must Be Reheard – ITAT Rules in Favour of Trust
Assessee, a charitable trust running a school, filed NIL return for AY 2016-17. Its case was selected for scrutiny, but since it did not comply with several notices u/s 143(2) & 142(1), the assessment was completed u/s 144. Consequent penalty proceedings u/s 271(1)(b) were initiated and penalty of ₹40,000 was levied for four instances of non-compliance.
Before CIT(A), Trust argued that it had already appealed against the ex parte order u/s 144, hence the penalty should have been kept in abeyance. It also pointed out irregularities-penalty order dated 28.06.2019 was signed by one officer (Shri Sanjay Kumar, ITO), while demand notice u/s 156 was issued a day earlier on 27.06.2019 by another officer (Shri Prashant Singh, ITO). However, CIT(A) dismissed the appeal ex parte on 23.04.2025 citing non-compliance.
Before ITAT, Assessee submitted that non-compliance occurred due to negligence of its earlier AR. Later, it engaged a new CA and sought time before CIT(A) (via letter dated 19.04.2025) to file fresh statement of facts & grounds, but CIT(A) ignored the request & dismissed the appeal. It also contended that the irregularity between demand notice & penalty order made the levy bad in law. Reliance was placed on Reuters Asia Pacific vs DCIT [2023] 157 taxmann.com 705 (Mum-Trib).
Tribunal held that facts in Reuters were different (unsigned order there). Here, since the quantum appeal against assessment u/s 144 was still pending, penalty appeal deserved fresh consideration. Given the Trust’s bona fide request for additional time, principles of natural justice required another opportunity. Accordingly, ITAT set aside CIT(A)’s order and restored matter for fresh adjudication, directing CIT(A) to hear the Trust properly and decide afresh.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 23.04.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year 2016-2017.
2. The assessee has raised the following grounds in this appeal.
“1. It is submitted that the order imposing penalty of Rs. 10,000/-dated 28.06.2019 [ITBA/PNL/7271(1)(b)/2019-20/1016563977(1)] is bad in law and is required to be held as illegal as the penalty order is under the signature of Mr. Sanjay Kumar, ITO Exemption Ward, Thane. However, the Demand notice has been issued on 27.06.2019 by Mr. Prashant Singh, ITO Exemption Ward, Thane, i.e. one day prior to the issue of the penalty order dated 28.06.2019. This is highly irregular and a serious aberration which would render the order of penalty to be contrary to law and procedure.
2. The Ld. CIT(A) erred in dismissing the appeal filed by the Trust on 24.07.2019 on the grounds of non-compliance to the notices issued u/s 250 of the Act as presented in para 4 of the order dated 23.04.2025. This is without considering the fact that vide submission dated 19.04.2025 the Trust requested for time to file a fresh SOF and Grounds. This was not considered by the Ld. CIT(A) and as such the dismissal of the appeal filed imposing penalty of Rs. 40,000/- is against the principles of natural justice.
3. The non-compliance on the part of the Trust at the stage of imposition of the penalty of Rs. 40,000/- and in the appellate proceedings before the Ld. CIT(A) were due to the fact that the Trust realized very late that the CA/AR appointed was not attending to the matters diligently. The Trust therefore appointed a senior CA to take the case ahead in the appellate stage for which fresh SOF and Grounds were require to be filed. This was conveyed to the Ld. CIT(A) vide submissions dated 19.04.2025 which was not considered and the appeal was dismissed on the Grounds of non-compliance of notices. This too is against the principles of natural justice.”
3. Brief facts of the case are that the assessee filed return declaring NIL income on 18.02.2017 for AY 2016-17. The case was selected for scrutiny and assessment was completed u/s. 144 of the Act. As the assessee did not make any compliance to the notices issued during the course of assessment proceedings, penalty proceedings u/s. 271(1)(b) were also initiated. Subsequently, penalty u/s. 271(1)(b) of Rs. 40,000/- was levied for the reason that the assessee had not complied with four notices issued u/s. 143(2) and 142(1) of the Act. Aggrieved with the penalty order, the assessee preferred an appeal before the Ld. CIT(A). It was submitted by the assessee in the statement of facts filed before Ld. CIT(A) that it had filed appeal against the order u/s. 144 and, therefore, the penalty proceedings u/s. 271(1)(b) should have been kept in abeyance by the Ld. AO. However, Ld. CIT(A) confirmed the imposition of penalty amount in Rs. 40,000/- after observing that the assessee did not produce any evidence in support of his claim during the appellate proceedings. Aggrieved with the order of Ld. CIT(A), the assessee has preferred an appeal before the Tribunal.
4. Before us, it has been submitted that the assessee was unaware of the non-compliance during the assessment proceedings as well as penalty proceedings as the authorised representative of the trust did not attend to the case properly. Thereafter, the assessee appointed another representative and, therefore, sought time from Ld. CIT(A) to file fresh statement of facts and as well as the grounds in the appeal against the penalty order vide submission dated 19.04.2025. However, Ld. CIT(A) dismissed the appeal on 23.04.2025 on account of non-compliance to the notices. It has also been submitted by the Ld. AR, that the penalty order was dated 28.06.2019 and the demand notice u/s. 156 was dated 27.06.2019. He has further pointed out that while the penalty order has been signed by Shri Sanjay Kumar ITO (E) ward, Thane, the demand notice has been issued one day prior to the order levying penalty and the same has been signed by different officer viz. Shri Prashant Singh, ITO(E) ward, Thane. In view of the above facts, Ld. AR has argued that the issue of penalty order and the demand notice is irregular which would render the order of penalty bad in law. Ld. AR has further placed reliance on the decision of the coordinate bench in the case of Reuters Asia Pacific vs DCIT [2023] 157 taxmann.com 705 (Mumbai -Trib).
4.1. Ld. DR on the other hand, has relied on the orders of the lower authorities.
5. We have heard the rival submissions and perused the material placed before us. As regards the reliance placed by the Ld. AR on the decision of the coordinate bench in the case of Reuters Asia Pacific (supra), we note that the facts of the present case are different. In the case of Reuters Asia Pacific, the assessment order was unsigned and, therefore, the same was held as invalid which is not the issue in present case. It is noted that the appeal against the assessment order u/s. 144 dated 25.12.2018 was filed before Ld. CIT(A) and the same has not yet been decided. However, the subsequent penalty order u/s. 271(1)(b) has been dismissed by the Ld. CIT(A) while the quantum appeal remains pending. Under these facts and circumstances and especially since the assessee had requested for further time to furnish fresh statements of facts before the Ld. CIT(A) we deem it appropriate to restore this appeal to the file of Ld. CIT(A) for fresh consideration after giving due opportunity to the assesses to make his submission on the issue. The appeal is accordingly allowed for statistical purposes.
6. In the result, appeal of the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 24.09.2025
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