The Case of Savita vs ITO Hapur: An Appeal Against Non-Compliance Penalties and Assessment for Assessment Year 2011-12

The Case of Savita vs ITO Hapur: An Appeal Against Non-Compliance Penalties and Assessment for Assessment Year 2011-12

In a significant case for the income tax jurisprudence, the Income Tax Appellate Tribunal (ITAT) of Delhi, on the case numbers ITA 1126/DEL/2022 and ITA 1127/DEL/2022, rendered a crucial judgment concerning the assessment and penalty proceedings against Smt. Savita, a resident of 387, Shivaji Nagar, Pilkhuwa, Hapur, Uttar Pradesh for the Assessment Year 2011-12. The ruling underlines principles of fairness in tax assessments and reiterates the tax authority’s obligation to provide reasonable opportunities for taxpayers to present their case.

The ITAT’s deliberation centered on two separate orders issued by the National Faceless Appeal Centre (NFAC), Delhi. The first, ITA No. 1126/Del/2022, pertains to the quantum of income assessed, and the second, ITA No. 1127/Del/2022, concerns the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Background of the Case

The origin of the dispute traces back to AIR information that indicated Savita had deposited cash amounting to Rs.26,30,766 in a banking institution. Based on this information, the Income Tax Officer (ITO), Ward-(3)(5), Hapur, reopened Savita’s assessment under section 147. The issue escalated when Savita allegedly failed to comply with the notices under section 148 and 142(1), leading the ITO to complete the assessment ex-parte under section 144 and determined the taxable income to Rs.13,15,380.

Unsatisfied with the ITO’s decision, Savita appealed to the first appellate authority, which upheld the assessment, against her interest.

Main Arguments and Tribunal’s Observation

The appellant’s primary grievance lay in the assertion that she was not granted a reasonable opportunity to be heard, either during the assessment proceedings or at the appellate level. This lack of opportunity, as argued, vitiated the entire process, lending credence to her appeal for a de novo assessment.

Considering both parties’ arguments, the tribunal noted the procedural lapses, particularly the claim of invalid notice service on the appellant, which essentially deprived her of the chance to furnish evidence supporting the source of the cash deposit.

In light of these observations, the tribunal found merit in restoring the case back to the Assessing Officer for a thorough re-examination, ensuring that Savita is given a fair chance to present her case. This decision aligns with the principles of natural justice and emphasizes the tax authority’s duty to ensure procedural fairness.

Implications of the Decision

The tribunal’s decision to allow the appeal for statistical purposes and remand the case for de novo assessment has multiple implications. It highlights the importance of adherence to procedural norms and the taxpayer’s right to be heard. Furthermore, it signals to the tax authorities the need for meticulousness in following due process, especially when it comes to service of notice and conducting assessments.

The case of Savita vs. ITO Ward-(3)(5), Hapur, brings to light critical aspects of tax administration and judicial oversight. It underscores the significance of procedural justice and the judiciary’s role in safeguarding taxpayer rights against arbitrary and ex-parte decisions.

Conclusion

The ITAT’s judgment in the cases of ITA 1126/DEL/2022 and ITA 1127/DEL/2022 serves as a precedent for future cases involving similar issues of non-compliance and assessment procedures. It reaffirms the judiciary’s commitment to ensuring fairness in the tax system and upholds the principles that underpin the rights of taxpayers.

The Case of Savita vs ITO Hapur: An Appeal Against Non-Compliance Penalties and Assessment for Assessment Year 2011-12