This document provides a detailed analysis of the Income Tax Appellate Tribunal’s final decision on the case between ITO, Ward-3(2)(4), Muzaffarnagar and Reena Jain, Muzaffarnagar, concerning the assessment year 2018-19. The case number is ITA 2578/DEL/2022, presided over by Judicial Member Shri Kul Bharat.
The appeal filed by the Revenue challenged the order dated 26.08.2022, passed by the National Faceless Appeal Centre (NFAC), Delhi. The case was filed on 2022-10-21, and the final order was pronounced on 2023-02-21. The main issue in this case was the disallowance of business expenditures and the penalty for non-compliance with notices under Section 272A(1)(d) of the Income Tax Act.
During the hearing on 15.02.2023, the Revenue was represented by Shri Sanjay Nargas, Sr. DR, while the assessee was represented by Shri Sanjeev Jain, CA.
The assessee argued that the authorities below failed to appreciate the fact that both the assessee and her counsel were suffering from COVID-19, which prevented them from attending the proceedings. The non-attendance was not deliberate but due to the unprecedented spread of the disease.
The Tribunal carefully considered the submissions and reviewed the orders passed by the authorities below. The Tribunal found that the issue on merits was related to the disallowance of business expenditures and the penalty imposed under Section 272A(1)(d) of the Income Tax Act.
The Tribunal observed that the Assessing Officer disallowed business expenditures amounting to Rs. 13,66,750/- based on insufficient documentary evidence. The assessee provided ledger accounts of the expenses, but they were not supported by adequate documentation.
The Tribunal noted that the penalty of Rs. 10,000/- under Section 272A(1)(d) was imposed due to the assessee’s non-compliance with notices issued during the assessment proceedings. The assessee claimed that the non-attendance was due to COVID-19, which the authorities should have considered.
The Tribunal concluded that the appeal filed by the assessee regarding the penalty under Section 272A(1)(d) should be allowed due to the unprecedented circumstances of the COVID-19 pandemic. The order of the CIT(A) was set aside, and the Assessing Officer was directed to delete the penalty. However, the issue regarding the disallowance of business expenditures was remanded back to the Assessing Officer for de novo assessment, providing the assessee with a reasonable opportunity to present adequate documentation.
Order pronounced in the open court on 21st February, 2023.
(KUL BHARAT)
JUDICIAL MEMBER
This case highlights the importance of considering unprecedented circumstances like the COVID-19 pandemic when assessing compliance with tax notices and proceedings. It underscores the necessity for tax authorities to adopt a liberal approach in such situations to ensure fair treatment of taxpayers.
The appellant, Reena Jain, Muzaffarnagar, challenged the penalty imposed under Section 272A(1)(d) and the disallowance of business expenditures. The Assessing Officer had added Rs. 13,66,750/- to the income of the assessee for the assessment year 2018-19, citing insufficient documentation for business expenditures. Additionally, a penalty of Rs. 10,000/- was imposed for non-compliance with notices.
The assessee argued that the non-attendance of the proceedings was due to the COVID-19 pandemic, which affected both the assessee and her counsel. The assessee also contended that adequate opportunity to present documentation was not provided by the authorities.
The Revenue opposed these submissions, maintaining that reasonable opportunity was granted and that the disallowance and penalty were justified based on the facts and evidence presented.
The Tribunal observed that the authorities should have adopted a liberal approach considering the unprecedented circumstances of the COVID-19 pandemic. The Tribunal found that the penalty under Section 272A(1)(d) should be deleted, and the case regarding the disallowance of business expenditures should be remanded back to the Assessing Officer for a fresh assessment with proper opportunity for the assessee to present documentation.
The Tribunal’s decision in the case of ITO, Ward-3(2)(4), Muzaffarnagar vs Reena Jain, Muzaffarnagar, reaffirms the importance of considering exceptional circumstances such as the COVID-19 pandemic when assessing compliance with tax notices and proceedings. The Tribunal’s directive to set aside the penalty and remand the disallowance issue back to the Assessing Officer underscores the necessity for fair treatment and due process in tax assessments.
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