Parsvnath Rail Land Project Private Limited vs DCIT

Per Kavitha Rajagopal, J M:

This appeal is filed by the assessee, challenging the order of the Learned Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act', for short), pertaining to the Assessment Year (‘A.Y.s’ for short) 2017-18.

The assessee has raised the following grounds of appeal:-

It is observed that the appeal is filed belatedly with a delay of 432 days beyond the period of limitation for which the assessee has filed an application for condoning the delay along with an affidavit. Upon perusal of the same, we deem it fit to condone the delay as there being ‘sufficient cause’ for the said delay. Delay condoned.

Brief facts of the case are that in this case, the assessment u/s 143(3) of the Act was completed on 09.12.2019 determining total income at (-)Rs.6,13,64,329/-as against returned income of (-)Rs.9,37,64,329/-.The facts of the case leading to initiation of penalty u/s 270A of the Act are that in this case, while finalizing assessment, the disallowance of expense u/s 40(a)(ia) of the Act was made. The case was selected for complete scrutiny assessment through CASS for the reason that “The assessee has not filed TDS statement or the TDS reported by the assessee in form 26Q, 27Q and Form 26QB is significantly lower than the aggregate of TDS claimed to be deducted (by the assesse) by different taxpayers in their respective ITRs.” The assessee was requested to clarify the same. The assessee company vide letter dated 22.11.2019 had filed revised computation of income in which the assesse company had disallowed expenses of Rs.3,24,00,000/- u/s 40(a)(ia)/40(a)(i) of the Act on account of disallowance of expenses on which TDS had not been deducted by the assessee company or not deposited to the Govt. Account in terms of relevant provisions of the Act. The said disallowances were made on gross expenses amounting to Rs.10,80,00,000/- @ 30% or 100% as applicable u/s. 40(a)(ia)/40(a)(i) of the Act. Consequently, the AO finalized the assessment by disallowing the expense to the extent of Rs.3,24,00,000/- which was added to the total income of the assessee.

The Ld. AO also initiated penalty proceedings u/s. 270A of the Act by issuing notice dated 09.12.2019 which was duly served upon the assessee along with assessment order. Since the assessee submitted its reply on 13.06.2020, long after the expiry of given time, following the principle of natural justice, two more notices u/s 270A of the Act dated 25.02.2021 and 13.03.2021 were issued and duly served upon the assessee. The assessee in its reply submitted on 16.03.2021 reiterated its contentions made in the reply submitted on 13.06.2020, the relevant portion of which has been reproduced in the order of the Ld. AO. After considering the reply filed by the assessee, the Ld. AO held that the same was general and routine in nature and he did not find any force in it. The assessee’s request to drop the penalty proceedings was, therefore, not acceded to. The assessee’s contention that it voluntarily offered to disallow the expense as well as filed a revised computation of total income based on the disallowance made was not accepted as the assessee filed revised computation only after the case was selected under scrutiny. The AO held that had the case not been selected for scrutiny assessment, these facts would not have come to light and the income would have escaped assessment. Moreover the assessee’s contention that the accountant of the company has inadvertently not added back expenses of Rs.3,24,00,000/- (i.e. Rs 10,80,00,000 * 30%) under section 40(a)(ia) of the Income Tax Act, 1961 and therefore, it was not intentional under-reporting was also not tenable as the “principle of Mens Rea" is not necessarily applicable in the case of penalty proceedings under the Act. Reliance has been made on the Judgment of the Hon’ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors (SC) 306 ITR 277 for the proposition that the onus was not on the Revenue to prove the wilful concealment for levy of penalty under the Act. It was also held that the object behind enactment of section 270A read with the explanations thereto, indicates that the said section has been enacted to provide for a remedy for loss of revenue. Accordingly, penalty of Rs.2,14,24,824/- being 200% of the tax on under reported income in consequence of misreporting was imposed.

Aggrieved by the said penalty imposed by the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who, vide order dated 19.12.2024, dismissed the appeal filed by the assessee holding that there was no written submissions by the assessee in support of its appeal despite several notices issued to the assessee calling for the same. The ld. CIT(A) also held that as per the provisions of Section 270A(10)(b) of the Act it was clear that immunity from penalty u/s 270AA is not granted in cases where there is assessed loss. Without prejudice to the above, the assessee did not satisfy the conditions provided in Section 270AAA of the Act. Moreover, the assessee had also not provided any document to prove that it is eligible for claiming immunity u/s 270AA of the Act. Aggrieved, the assessee is in appeal before us.

We have heard the rival submissions and perused the material available on record. It is observed that the Ld. CIT(A) has dismissed the appeal on the ground inter alia that written submissions were not filed to substantiate its case although various notices were issued by the Ld. CIT(A) calling for the same during the appellate proceedings. Before us, the Ld. AR for the assessee prayed that the assessee be given one more opportunity to present its case before the CIT(A) by filing written submissions, stating that the assessee has got a good case on the merits.

The Ld. DR vehemently opposed to granting the assessee another opportunity for the reason that the assessee has been non-compliant before the first appellate authority.

On the above facts of the case, we deem it fit to extend the assessee with one more opportunity to present its case before the Ld.CIT(A) by adhering to the principles of natural justice and in the interest of justice dispensation. The assessee is directed to strictly comply with the proceedings before the Ld. CIT(A) who is to adjudicate all the grounds raised by the assessee, both legal as well as on the merits, in accordance with the provisions of law and on the merits of the case. The grounds of appeal raised by the assessee are hereby allowed for statistical purposes

In the result, the appeal filed by the assessee is allowed for statistical purpose as per the above observation.