2011 (6) TMI 1021 - AT - Income Tax

Penalty appeal under Income Tax Act dismissed; file with Commissioner of Income-tax

The Sub-Registrar, Salem, The Sub-Registrar, Koothanallur, The Sub-Registrar, Virudhachalam and The Sub-Registrar, Veppur Versus The Director of Income Tax (CIB), (I/C), Chennai, The Director of Income Tax, CIB, Chennai

The Sub-Registrar, Salem, The Sub-Registrar, Koothanallur, The Sub-Registrar, Virudhachalam and The Sub-Registrar, Veppur Versus The Director of Income ... 1. ISSUES PRESENTED AND CONSIDERED - Whether an assessee can file a direct first appeal before the Income-tax Appellate Tribunal against a penalty order passed by the Director of Income-tax (CIB) under section 271FA of the Income Tax Act. - Whether section 253 (or any other provision) of the Income Tax Act confers jurisdiction on the Tribunal to entertain a direct appeal against an order passed under section 271FA. - If direct appeal to the Tribunal is not maintainable, whether an assessee has a remedy of appeal to the Commissioner of Income-tax (Appeals) under section 246A(1)(q) and any guidance as to filing such an appeal. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of direct appeal to the Tribunal against penalty under section 271FA - Legal framework: Section 271FA creates a penalty within Chapter XXI (penalties) of the Income Tax Act. Appeals from penalty orders are governed by the appeal provisions applicable to that chapter; section 246A(1)(q) identifies the Commissioner of Income-tax (Appeals) as the first appellate authority for specified penalty orders. Section 253 prescribes appeals to the Tribunal but only where provision for appeal to the Tribunal exists by statute. - Precedent Treatment: Earlier Bench orders of the Tribunal (referred to and relied upon) have held that there is no statutory provision enabling a direct appeal to the Tribunal against an order under section 271FA; those orders dismissed similar direct appeals in limine. The present Tribunal follows those earlier Bench decisions. - Interpretation and reasoning: The Tribunal examined the statutory scheme and found no provision in the Act that permits an assessee to bypass the Commissioner of Income-tax (Appeals) and file a direct appeal to the Tribunal against a section 271FA penalty order. Because the appeal route specified by the statute for penalty orders falling under Chapter XXI is to the CIT(A) under section 246A(1)(q), there is no basis to invoke section 253 for a direct first appeal to the Tribunal in such cases. Administrative documents (e.g., demand notices) indicating the Tribunal as appellate authority do not alter the statutory scheme. - Ratio vs. Obiter: Ratio - Direct first appeal to the Tribunal against a penalty order under section 271FA is not maintainable because the statute does not provide for such an appeal; such appeals are liable to be dismissed in limine. Obiter - Reference to the possibility that an assessee may seek legal opinion and file an appeal before the Commissioner of Income-tax (Appeals) (see Issue 3). - Conclusion: The Tribunal lacks jurisdiction to entertain direct appeals under section 271FA; such appeals must be dismissed as not maintainable. Issue 2 - Applicability of section 253 or other provisions to confer appellate jurisdiction on the Tribunal - Legal framework: Section 253 confers appellate jurisdiction on the Tribunal only where the statute expressly or implicitly provides for appeal to the Tribunal. The appellate route must be ascertained from the specific provisions dealing with appeals for the type of order in question. - Precedent Treatment: Tribunal Benches have consistently interpreted the statutory appeal scheme to mean that absent an express provision for appeal to the Tribunal against a particular order, section 253 cannot be used to create such a right of direct appeal. - Interpretation and reasoning: The Tribunal applied this principle to penalty orders under section 271FA and found no provision in the Act permitting a direct appeal to the Tribunal. Therefore section 253 cannot be invoked to entertain a direct appeal which the Act routes to the Commissioner of Income-tax (Appeals). - Ratio vs. Obiter: Ratio - Section 253 does not enable the Tribunal to entertain a direct first appeal against a section 271FA penalty order where the Act provides the first appeal to the CIT(A). Obiter - Administrative misstatements in demand notices do not confer jurisdiction on the Tribunal. - Conclusion: Section 253 is inapplicable to create a right of direct appeal to the Tribunal against orders under section 271FA; such attempts are not maintainable. Issue 3 - Availability of appeal to Commissioner of Income-tax (Appeals) under section 246A(1)(q) and procedural guidance - Legal framework: Appeals from penalty orders falling under Chapter XXI are subject to the appeal provisions applicable to penalties; section 246A(1)(q) identifies the CIT(A) as the appellate authority for specified matters. - Precedent Treatment: Prior Tribunal orders observed that an assessee may be entitled to pursue an appeal before the CIT(A) where the statutory provision so contemplates; those orders suggested that an assessee may obtain legal opinion before proceeding. - Interpretation and reasoning: The Tribunal acknowledged that section 271FA falls within Chapter XXI and that an appeal against a penalty order under that section lies to the CIT(A) under section 246A(1)(q). Given the dismissal of the direct appeals to the Tribunal for lack of statutory provision, the Tribunal noted (as guidance) that aggrieved taxpayers may file their appeals before the Commissioner of Income-tax (Appeals), subject to any legal prerequisites (such as time limits and conditions) and contingent on obtaining appropriate legal advice. - Ratio vs. Obiter: Obiter - The Tribunal's suggestion that an assessee may file an appeal before the CIT(A) is advisory, not determinative of any substantive question of law in the present proceedings (since the Tribunal dismissed the direct appeals for want of jurisdiction). The core ratio remains jurisdictional dismissal. - Conclusion: Where the Act provides the first appeal to the CIT(A) (section 246A(1)(q)), an assessee should pursue that remedy; the Tribunal's dismissal of direct appeals does not deprive assessees of their statutory right to approach the CIT(A). Overall Disposition - The appeals filed directly to the Tribunal against penalty orders under section 271FA are dismissed in limine as not maintainable because the statute does not provide for a direct appeal to the Tribunal; the proper first appellate remedy lies under section 246A(1)(q) to the Commissioner of Income-tax (Appeals). Prior Bench decisions to the same effect have been followed.