Ram Kumar Dhiamn vs. ITO Ward-26(4): Challenging Penalty Under Section 271B for Assessment Year 2015-16

Ram Kumar Dhiamn vs. ITO Ward-26(4): Challenging Penalty Under Section 271B for Assessment Year 2015-16

In the case of Ram Kumar Dhiamn, New Delhi versus ITO Ward-26(4), New Delhi, the Income Tax Appellate Tribunal (ITAT) of Delhi Bench ‘F’, presided over by Shri Saktijit Dey, Judicial Member, and Shri Anadee Nath Misshra, Accountant Member, heard an appeal concerning the assessment year 2015-16. The appellant, Ram Kumar Dhiamn, challenged the penalty imposed under Section 271B of the Income-tax Act, 1961, which was confirmed by the Commissioner of Income-tax (Appeals) [CIT(A)]. The case was filed on 1st August 2019 and the final order was pronounced on 26th September 2022.

Background of the Case

Ram Kumar Dhiamn, a resident of New Delhi, filed his income tax return for the assessment year 2015-16. During the assessment proceedings, the Income Tax Officer (ITO) Ward-26(4) observed certain discrepancies and imposed a penalty under Section 271B of the Income-tax Act. Section 271B pertains to the failure to get accounts audited as required under Section 44AB, which mandates that every person carrying on business or profession with gross receipts exceeding specified limits must have their accounts audited.

The appellant, dissatisfied with the penalty imposed, appealed to the Commissioner of Income-tax (Appeals) [CIT(A)], New Delhi. However, the CIT(A) upheld the penalty, citing the appellant’s repeated non-appearance and lack of submission of relevant explanations or documents to support his case.

Proceedings Before the ITAT

The case was brought before the ITAT for further adjudication. When the appeal was called for hearing on 19th September 2022, the appellant did not appear to represent the case. The notice of hearing sent to the appellant’s address via speed post was returned unserved, marked with the postal remark “left.” In the absence of the appellant, the ITAT decided to proceed with an ex-parte hearing, considering the arguments presented by the Departmental Representative and the materials available on record.

The Departmental Representative, Ms. Maimun Alam, supported the order passed by the CIT(A) and argued for the penalty to be upheld. She emphasized that the appellant had consistently failed to appear or provide any substantial evidence or explanation during the proceedings, justifying the penalty imposed under Section 271B.

Tribunal’s Findings and Judgment

After considering the submissions and reviewing the case file, the ITAT observed that the CIT(A) had disposed of the appeal ex-parte due to the appellant’s non-appearance and repeated requests for adjournments. While the ITAT acknowledged the CIT(A)’s authority to proceed ex-parte in such circumstances, it noted that the CIT(A) had failed to provide any substantive reasoning or detailed explanation for upholding the penalty.

The Tribunal found that the CIT(A)’s order was cryptic, non-speaking, and lacked proper reasoning, making it difficult to ascertain the basis on which the penalty under Section 271B was confirmed. The ITAT emphasized that even when disposing of an appeal ex-parte, the CIT(A) is expected to evaluate the case on its merits and provide a well-reasoned order.

Given the absence of detailed reasoning in the CIT(A)’s order, the ITAT decided to set aside the impugned order and remand the case back to the CIT(A) for de-novo adjudication. The Tribunal directed the CIT(A) to provide the appellant with a reasonable opportunity to be heard and to adjudicate the appeal on its merits, ensuring that the final order is backed by proper reasoning and detailed consideration of the facts.

Conclusion

In its final judgment, the ITAT allowed the appeal for statistical purposes, remanding the case to the CIT(A) with clear instructions to re-examine the issues after giving the appellant a fair opportunity to present his case. The Tribunal’s decision underscores the importance of procedural fairness and the need for detailed and reasoned orders in tax adjudications, especially when penalties are involved.

This case serves as a reminder that even in instances of non-compliance by the appellant, tax authorities must adhere to principles of natural justice and ensure that decisions are based on a thorough examination of the case with adequate reasoning.

Order Pronounced in the Open Court on 26th September 2022

Signed by:
Judicial Member: Shri Saktijit Dey
Accountant Member: Shri Anadee Nath Misshra

Date of Pronouncement: 26th September 2022

Ram Kumar Dhiamn vs. ITO Ward-26(4): Challenging Penalty Under Section 271B for Assessment Year 2015-16