This article provides an in-depth analysis of ITA No. 1433/DEL/2020, involving ACIT Central Circle-14, New Delhi, and MM Buildcon Pvt Ltd of New Delhi. The case pertains to the assessment year 2008-09 and was filed on July 23, 2020. The final tribunal order was pronounced on April 24, 2023.
MM Buildcon Pvt Ltd, located at Flat No. 4, RR Apartments, 3-4 Manglapuri, New Delhi, filed an appeal against the assessment order for the assessment year 2008-09. The case was heard by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘E’, with Sh. N.K. Billaiya serving as the Accountant Member and Sh. Anubhav Sharma as the Judicial Member. The appeal was related to the imposition of penalties under sections 271(1)(c) and 271AAA of the Income Tax Act, 1961.
The appellant originally filed a return of income declaring a total income for the assessment year 2008-09. The case was selected for scrutiny, and the assessment was framed under section 143(3) read with section 153A of the Income Tax Act, resulting in several additions and the imposition of penalties.
The primary issues in this case were the following penalties levied by the Assessing Officer (AO):
The appellant, represented by Ms. Monika Agarwal, argued that the penalties were unjustified as the entire basis of the assessments had been annulled by the Tribunal in a consolidated order dated February 8, 2023. The counsel for the appellant presented a copy of this decision to support their case.
The Revenue Department, represented by Ms. Sarita Kumari, CIT DR, could not provide any distinguishing decision in favor of the revenue to counter the appellant’s arguments.
The ITAT bench, after considering the arguments and perusing the records, found that the approval granted by the Additional Commissioner of Income Tax (Addl. CIT) for the assessments was mechanical and without application of mind. This rendered the assessment orders framed under section 143(3) read with section 153A of the Income Tax Act invalid.
The Tribunal noted that the entire foundation of the penalties was based on the annulled assessments. Consequently, the superstructure of penalties could not stand without a valid assessment order. The Tribunal referred to para-39 of its earlier order in the consolidated case, where it held that the approval by the Addl. CIT was mechanical and without application of mind.
Since the assessment orders were invalid, the penalties levied under sections 271(1)(c) and 271AAA were also directed to be deleted. The Tribunal allowed the appeals filed by the assessee and dismissed the appeal filed by the revenue.
The ITAT concluded that the penalties imposed by the AO and affirmed by the CIT(A) were not justified due to the invalid assessment orders. The Tribunal allowed the appeal of MM Buildcon Pvt Ltd and directed the deletion of the penalties.
This case highlights the importance of proper approval and application of mind by the Addl. CIT when granting approval for assessments under section 153A of the Income Tax Act. It also emphasizes that penalties should not be imposed based on invalid or annulled assessment orders.
For taxpayers, this case underscores the necessity of challenging penalties and assessments that do not comply with the legislative framework and judicial precedents. It also serves as a reminder of the importance of ensuring that all procedural requirements are met during the assessment process to avoid unwarranted penalties.
In conclusion, the decision in ITA No. 1433/DEL/2020 reaffirms the need for proper approval and application of mind in assessment proceedings and highlights the tribunal’s role in ensuring the fair application of tax laws and penalties.
MM Buildcon Pvt Ltd, New Delhi Penalty Appeal for AY 2008-09: ITA 1433/DEL/2020
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