Chander Yadav Noida vs ITO Ward-2(1), Noida: Penalty Appeal Under Section 271(1)(c) for AY 2011-12

Chander Yadav Noida vs ITO Ward-2(1), Noida: Penalty Appeal Under Section 271(1)(c) for AY 2011-12

Case Number: ITA 6433/DEL/2019
Appellant: Chander Yadav, Noida
Respondent: ITO Ward-2(1), Noida
Assessment Year: 2011-12
Date of Order: 2021-11-17
Order Type: Final Tribunal Order
Case Filed On: 2019-07-31

Background of the Case

This case concerns the appeal filed by Chander Yadav, a resident of Noida, against the penalty imposed by the Income Tax Officer (ITO) Ward-2(1), Noida, under Section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2011-12. The penalty was originally levied by the Assessing Officer (AO) and subsequently upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], prompting the appellant to challenge the order before the Income Tax Appellate Tribunal (ITAT), Delhi Bench.

The penalty in question amounted to Rs. 4,97,500/- and was imposed due to alleged concealment of income or furnishing of inaccurate particulars of income by the appellant during the assessment year under dispute. The penalty proceedings were initiated following the quantum assessment that had resulted in additions to the appellant’s income.

Details of the Quantum Appeal

Before addressing the penalty appeal, it is essential to understand the context of the quantum appeal. The appellant had earlier filed an appeal against the quantum additions made by the AO for the assessment year 2011-12. This quantum appeal was heard by the ITAT under ITA No. 1250/DEL/2019, where the Tribunal, in its order dated 31.07.2019, set aside the assessment to the file of the AO for fresh adjudication. This decision effectively reopened the assessment process, allowing the appellant to present his case afresh before the AO.

Given that the quantum additions, which formed the basis for the penalty, were no longer final and were subject to fresh adjudication, the appellant argued that the penalty under Section 271(1)(c) could not be sustained and should be deleted.

Tribunal’s Analysis and Findings

The ITAT, presided over by Shri R.K. Panda, Accountant Member, and Ms. Sakshi Rajput and Ms. Soumya Arora, Chartered Accountants representing the appellant, heard the appeal on 17.11.2021 through video conferencing. The Revenue was represented by Shri Om Prakash, Senior Departmental Representative (DR).

During the hearing, the appellant’s counsel submitted the order of the ITAT dated 31.07.2019, which set aside the quantum appeal to the AO for fresh adjudication. The counsel argued that since the quantum appeal was remanded back for a fresh decision, the penalty imposed under Section 271(1)(c) could not survive. The Revenue’s representative, Shri Om Prakash, acknowledged this position and conceded that the penalty should not stand in light of the Tribunal’s earlier order.

Deletion of Penalty

The ITAT carefully considered the submissions from both sides and noted that the quantum appeal had indeed been set aside to the AO for fresh adjudication. The Tribunal observed that since the foundation of the penalty—i.e., the quantum assessment—was no longer valid, the penalty under Section 271(1)(c) could not be sustained at this stage. Consequently, the ITAT directed the deletion of the penalty amounting to Rs. 4,97,500/-.

However, the Tribunal also provided liberty to the AO to initiate fresh penalty proceedings, if necessary, after the completion of the reassessment process, depending on the outcome of the quantum adjudication.

Conclusion

The case of Chander Yadav vs ITO Ward-2(1), Noida for the assessment year 2011-12 highlights the procedural intricacies involved in penalty proceedings under Section 271(1)(c) of the Income-tax Act. The Tribunal’s decision to delete the penalty reinforces the principle that penalty proceedings are dependent on the outcome of the quantum assessment. When the quantum assessment is set aside or reopened, the associated penalty proceedings cannot be sustained and must be reconsidered based on the final outcome of the reassessment.

This case serves as a reminder to taxpayers and tax authorities alike that penalty proceedings should be carefully evaluated in light of the finality of the underlying quantum assessment. The Tribunal’s ruling ensures that penalties are not imposed unjustly or prematurely, and that taxpayers are given a fair opportunity to contest and resolve quantum disputes before facing any penalty liabilities.

The final judgment in this case underscores the importance of following due process in tax assessments and penalty proceedings, providing clarity on the interplay between quantum assessments and penalties under the Income-tax Act.

Chander Yadav Noida vs ITO Ward-2(1), Noida: Penalty Appeal Under Section 271(1)(c) for AY 2011-12