Case Law Details
Shri Vijay Kumar Reddy Vs ACIT (ITAT Hyderabad)
ITAT), Hyderabad bench has issued an order pertaining to the application of penalties under section 271AAC of the Income Tax Act in the case of Shri Vijay Kumar Reddy Vs ACIT. The Tribunal asserted that penalty under this section is not applicable if the tax under section 115BBE of the Act is nil. The case necessitates readjudication, bearing implications for the enforcement of penalties for undisclosed income.
The ITAT bench pointed out that the penalty imposed under section 271AAC is predicated on the tax payable under section 115BBE. The appellant, Shri Vijay Kumar Reddy, emphasized that in his case, the tax calculated under this section amounted to zero. Hence, by extension, the penalty applied under section 271AAC should be invalidated.
The appellant contended that despite the cash seized during an operation under section 132A, the tax levied under section 115BBE was nil as per the computation sheet. Hence, the penalty under section 271AAC, which is calculated based on the tax levied under section 115BBE, should not be applicable.
On hearing the arguments from both sides, the Tribunal decided to restore the issue to the CIT (A) for readjudication. The Tribunal, considering the totality of facts, deemed it appropriate to provide the appellant one final opportunity to present his case.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal filed by the assessee is directed against the order dated 18.01.2023 of the learned CIT (A)-11, Hyderabad, relating to A.Y.2019-20.
2. The assessee has raised the following grounds:
“1. The Order of the learned Commissioner of Income Tax (Appeals), is contrary to the facts of the case and provisions of law.
2. The action of the learned Commissioner of Income Tax (Appeals) in passing the order under section 250 of the Income Tax Act, 1961, against the assessee is unjust, arbitrary, and deserves to be quashed.
3. That action of the learned Commissioner of Income-tax (Appeals) in not providing the proper opportunity of being heard and dismissing the appeal on the basis that no representation., is against the cardinal principle of natural justice, and accordingly order deserves to be quashed.
4. The action of the learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in levying a penalty u/s 271AAC for amount of Rs.2,70,000/-, contrary to that the same CIT(Appeals) was deleted of Rs.27,00,000/- u/s 271AAB.
5. The action of the learned Commissioner of Income Tax (Appeals) erred in confirming the action of the assessing officer in Levying penalty u/s 271AAC an amount of Rs 2,70,000/- Without giving any proper opportunity.
6. The learned Commissioner of Income-Tax (Appeal) erred in not considering the fact that the Assessing officer issued notice u/s 274 r.w.s 271 dated without mentioning in which limb the penalty is leviable.
7. For these and other grounds that may be urged at the time of hearing, it is submitted that the Order of tie lower authorities be set aside or modified as may be deemed fit”.
3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 30.09.2020 declaring total income at Rs.1,25,14,090/-. The police authorities found cash of Rs.45.00 lakhs on 5.12.2018 from an employee of the assessee and the said cash was owned up by the assessee during the inquiries conducted. The said cash was requisitioned by the Investigation Wing u/s 132A of the Act. The assessee in its return of income filed included the said cash of Rs.45.00 lakhs as business receipts. On being questioned by the Assessing Officer, the ass explained that he is earning his income by arranging in mediation between the buyers and sellers under the real estate. However, in absence of any documentary evidence to support the same, the Assessing Officer rejected the explanation given by the assessee and treated the cash seized of Rs.45.00 lakhs as unexplained income u/s 69A r.w.s. 115BBE of the Act.
4. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271AAC and accordingly issued notice u/s 274 r.w.s. 271AAC of the Act which was duly served on the assessee. However, the assessee failed to respond to the said notice. The Assessing Officer, therefore, levied penalty of Rs.2,70,000/- u/s 271AAC on the seized cash of Rs.45.00 lakhs found at the time of cash seizure operation u/s 132A proceedings being 10% of tax payable u/s 115BBE(1)(1) of the Act.
5. Since the assessee did not appear before the CIT (A) despite number of opportunities granted, the learned CIT (A) in ex-parte order passed by him sustained the penalty so levied by the Assessing Officer.
6. Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.
7. The learned Counsel for the assessee at the outset referring to the computation sheet placed at page 10 to 13 of the Paper Book drew the attention of the Bench to cl. 23 and submitted that the tax on 115BBE has been mentioned as zero, therefore, no penalty u/s 271AAC should have been levied. He submitted that given an opportunity, the assessee is in a position to substantiate before the learned CIT (A) that the assessee is not liable for any penalty u/s 271AAC of the Act since no tax is payable u/s 115BBE as per the computation sheet.
8. The learned DR, on the other hand, submitted that despite number of opportunities granted by the Assessing Officer & CIT (A), the assessee never bothered to appear before them. Therefore, penalty levied by the Assessing Officer and sustained by the learned CIT (A) should be upheld.
9. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We find the AO in the instant case levied penalty u/s 271AAC on the ground that the assessee could not explain the source of Rs.45.00 lakhs from real estate activities by producing cogent documentary evidence for which the addition was made u/s 69A r.w.s. 115BBE of the I.T. Act. We find the learned CIT (A) in the ex-parte order passed by him upheld the action of the Assessing Officer on the ground that despite number of opportunities granted, the assessee did not appear before him. While doing so, he further held that although the assessee admitted Rs.45.00 lakhs as business income, however, in absence of any documentary evidence filed to support the contention that the same was out of business income, the Assessing Officer had rightly assessed the same as unexplained money u/s 69A r.w.s. 115BBE of the Act. It is the submission of the learned Counsel for the assessee that in the computation statement, the tax u/s 115BBE is mentioned at zero and therefore, no penalty u/s 271AAC should be levied. It is also his alternate contention that given an opportunity, the assessee is in a position to substantiate before the lower authorities as to how the penalty u/s 271AAC is not leviable. Since the assessee did not appear before the CIT (A) despite number of opportunities granted, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT (A) with a direction to grant one final opportunity to the assessee to substantiate his case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the learned CIT (A) on the appointed date and substantiate his case without seeking any adjournment under any pretext failing which the learned CIT (A) is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
10. In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court at the time of hearing itself on 3rd May, 2023.
