Suresh Turyamal Jaswani Vs ITO (ITAT Nagpur)
Section 271(1)(c) Penalty Sent Back for Fresh Adjudication After Quantum Appeal Remand
Background of the Case
The assessee, an individual engaged in the retail business of kirana items, had filed his return of income for Assessment Year 2014-15, declaring total income of ₹2,49,780.
The assessment dispute arose from the sale of a plot during Financial Year 2013-14. The assessee had claimed a long-term capital loss, but the Department questioned the acquisition and construction costs claimed in computing the result of the transaction.
The Assessing Officer also considered that the property had been held for less than three years. Consequently, he rejected the assessee’s treatment of the transaction as giving rise to a long-term capital loss and denied the corresponding indexation benefit.
The assessment proceedings ultimately resulted in additions relating to the property transaction and the assessee’s business income.
Assessment of Capital Gains and Business Income
The Assessing Officer denied the claimed construction cost for want of supporting evidence and determined short-term capital gains of ₹32,53,000.
He also determined business income of ₹3,27,485, assessing total income at ₹35,80,485 through an order passed under Section 143(3) read with Section 147.
The Tribunal’s narration contains a reference to Section 111A while describing the assessment of gains from the plot. However, the present appeal concerned the subsequent penalty, and the Tribunal did not adjudicate the correctness of that reference or the applicable capital gains tax rate.
The underlying quantum dispute was therefore relevant as the foundation for the penalty proceedings, rather than as an issue finally decided in this order.
Penalty of ₹7.94 Lakh Levied
Following the assessment, the Assessing Officer issued a notice under Section 274 read with Section 271(1)(c).
The assessee did not respond to the penalty proceedings. The Assessing Officer thereafter imposed a penalty of ₹7,93,948, through an order dated 6 March 2025.
The assessee challenged the penalty before the CIT(A)/NFAC.
However, despite hearing notices being issued, there was no compliance before the first appellate authority. The CIT(A) considered the grounds of appeal, statement of facts and assessment findings, confirmed the penalty and dismissed the appeal.
Grounds Raised Before the Tribunal
Before the Tribunal, the assessee challenged the confirmation of the penalty and contended that a proper opportunity had not been provided.
A significant ground was that the Tribunal had already set aside the first appellate order in the quantum proceedings and restored the quantum issues to the CIT(A).
The assessee therefore questioned the confirmation of penalty when the underlying assessment dispute had itself been reopened for appellate consideration.
No one appeared on behalf of the assessee at the Tribunal hearing. The Tribunal proceeded after hearing the Departmental Representative and examining the available record.
Tribunal Takes Note of Non-Compliance
The Tribunal acknowledged that the CIT(A) had issued hearing notices and provided several opportunities, as recorded in the appellate order.
It noted that the assessee had failed to respond on those dates and that the CIT(A) had consequently proceeded ex parte, treating the assessee as uninterested in pursuing the appeal.
Nevertheless, the Tribunal considered that there could be reasons for non-appearance or non-compliance which could not be ruled out.
It also took note of the specific ground concerning restoration of the quantum appeal to the CIT(A). That circumstance formed part of its consideration in deciding whether another opportunity should be granted in the penalty appeal.
Fresh Opportunity Granted in the Interest of Natural Justice
Considering the facts, circumstances and principles of natural justice, the Tribunal held that the assessee should receive one further opportunity to substantiate his challenge to the penalty.
It accordingly set aside the CIT(A)’s order and restored the penalty issue to the CIT(A) for fresh adjudication.
The first appellate authority was directed to provide an adequate opportunity of hearing. The assessee was correspondingly required to cooperate by submitting the necessary information and supporting evidence so that the appeal could be disposed of expeditiously.
The appeal was allowed for statistical purposes.
Scope and Significance of the Decision
The Tribunal did not cancel the penalty of ₹7,93,948 on merits. It set aside the appellate confirmation and directed a fresh decision after giving the assessee another opportunity.
Nor did it decide whether the disputed capital gains computation, rejection of construction cost or assessment of business income justified penalty under Section 271(1)(c). Those substantive questions remain for consideration in the restored proceedings.
The decision is therefore significant as a procedural relief in a case where the assessee had remained non-compliant, but had also pointed to the remand of the underlying quantum appeal.
Author’s Comments
The ruling should be understood as granting fresh appellate examination, rather than laying down that a quantum remand automatically results in cancellation of penalty.
The assessee must now explain the factual and legal basis for contesting the penalty and place the relevant material before the CIT(A). The restored proceedings provide that opportunity, while also requiring effective participation and cooperation.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT NAGPUR
The assessee has filed the appeal against the order of the CIT(A)/NFAC, Delhi passed u/sec. 271(1)(c) and u/sec250 of the Act.
2. The assessee has raised the following grounds of appeal:-
“1. Ld. CIT(A), NFAC, Delhi erred in confirming the penalty amounting to Rs. 7,93,948/-.
2. Ld. CIT(A), NFAC, Delhi erred in not giving proper opportunity to the appellant.
3. Ld. CIT(A), NFAC, Delhi erred in not appreciating or the fct that the Hon’ble ITAT has set aside the CIT(A)’s order passed by CIT(A) in the file of CIT(A) in quantum appeal.
4. Appellant craves to urge additional grounds at the time of hearing, if necessary.”
3. The brief facts of the case are that, the assessee has filed his return of income for the A.Y. 2014-15 disclosing a total income at Rs.2,49,780/-. Subsequently, the case was selected for scrutiny under CASS as the assessee has sold open plot in the F.Y.2013-14 and the assessee has claimed cost of acquisition without submitting any documentary evidences to substantiate the claim. The Assessing Officer (A.O) has reason to believe that the income has escaped assessment and issued notice u/sec. 148 of the Act. The AO find that the assessee derives income from business of sale of kirana items on retail basis and also claimed long term capital loss. The A.O dealt on the sale transaction of the plot and finds that the asset/plot was held by the assessee for less than three years and the A.O is of the view that the assessee is not entitled to claim benefits of indexation on purchase and construction and accordingly denied the benefit of cost of construction due to lack of evidences and made addition of Rs. 32,53,000/- as short term capital gain u/sec. 111A of the Act and Rs.3,27,485/- as business income and assessed the total income of Rs. 35,80,485/- and passed the order u/sec143(3) r.w.s147 of the Act. Subsequently the Assessing officer issued penalty notice u/sec274 r.w.s u/sec271(1)(c) of the Act and there was no compliance by the assessee and the A.O has levied penalty of Rs.7,93,948/- vide order u/sec271(1)(c) of the Act dated 6.03.2025.
4. Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, statements of facts and finding of the AO and has issued notice of hearings and since there was no compliance by the assessee. Therefore, CIT(A) considering information on record has confirmed the action of the AO in levying the penalty and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed the appeal before the Hon’ble Tribunal. None appeared on behalf of the assessee.
5. Heard the Ld.DR submissions and perused the material on record. Prima facie CIT(A) has passed the order considering the facts that there is no compliance in spite of providing adequate opportunity of hearing and notices were issued. Therefore, CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and dismiss the appeal ex-parte confirming the action of levy of penalty by the Assessing Officer. Whereas the CIT(A) has issued notices of hearing and provided ample opportunities to the assessee refereed at Para 4.1 of the order and there was no response on said dates. Whereas the assessee has raised grounds of appeal challenging the levy of penalty by the Assessing officer and there could be various reasons for non-appearance/ non-compliance on the disputed issue which cannot be overruled. Further, the assessee in grounds of appeal submitted that the Honble Income Tax Tribunal in the quantum appeal has restored the issues to the file of the CIT(A). Therefore, considering the facts, circumstances and principles of natural justice, shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the disputed issue to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal. And the grounds of appeal of the assessee are allowed for statistical purposes.
6. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 12th October, 2026.
