2018 (5) TMI 1487 - AT - Income Tax

Assessee's Penalty Appeal Dismissed by ITAT for Section 271FA Violation

The ITAT dismissed the assessee's appeals challenging the penalty order under Section 271FA, emphasizing that such orders are not directly appealable ... Jurisdiction of ITAT to entertain the appeal against the penalty order u/s 271F - Held that:- in the case of the Citizen Cooperative Society Ltd, Hyderabad vs. DIT (I&CI) [2018 (2) TMI 426 - ITAT HYDERABAD] has observed that, since a penalty order u/s. 271FA is not directly appealable order before this forum, the appeal preferred by assessee is liable to be dismissed. In the course of arguments, assessee's counsel was advised to prefer an appeal before the Ld.CIT(A) as directed by the DIT(I&CI) after levying the penalty in the demand notice. If the order has been passed by the Ld.CIT(A), this forum can entertain the appeal on such an order. Otherwise, assessee can choose to file a Writ Petition before the Hon'ble High Court, as this forum is only a statutory authority constituted under the Income Tax Act and the right of appeal on every order has to be statutorily provided either to the CIT(A) or to the ITAT as the case may be. Since a penalty order u/s. 271FA is not directly appealable order before this forum, the appeal preferred by assessee is liable to be dismissed. - appeals are dismissed. Issues:Appealability of penalty order under Section 271FA before ITAT - Validity of penalty under Section 271FA - Applicability of Rule 114E of IT Rules to Cooperative Society - Merits of penalty imposition by DIT(I&CI) - Forum for appeal against penalty order under Section 271FA.Analysis:1. Appealability of penalty order under Section 271FA before ITAT:The appeals were filed challenging the order of the DIT (I&CI) under Section 271FA for the assessment years 2010-11 to 2015-16. The ITAT considered the provisions of Section 253 of the Act and a decision of the Coordinate Bench in a similar case. The ITAT noted that while Section 253 does not specify the order of penalty under Section 271FA as appealable before ITAT, the assessee argued that the appeal is maintainable based on various legal contentions. The ITAT, however, concluded that since a penalty order under Section 271FA is not directly appealable before ITAT, the appeals filed by the assessee were liable to be dismissed.2. Validity of penalty under Section 271FA:The ITAT examined the validity of the penalty imposed under Section 271FA on the assessee. It was argued that the assessee, being a Cooperative Society, was not covered by the provisions of Rule 114E of the IT Rules. The assessee contended that its status did not align with that of a Cooperative Bank, as established in previous judicial decisions. The ITAT observed discrepancies in the penalty order issued by the DIT(I&CI), noting that the penalty was imposed for non-filing of a statement even though the assessee had submitted explanations and statements within the specified timelines. The ITAT found that there were inconsistencies in the penalty order, including errors in dates and misinterpretation of the assessee's status, indicating a lack of proper assessment before the penalty imposition.3. Applicability of Rule 114E of IT Rules to Cooperative Society:The ITAT analyzed the applicability of Rule 114E of the IT Rules to the Cooperative Society in question. The assessee argued that being a Cooperative Society, it was not obligated to furnish certain information under Rule 114E, as only Banking Companies and Cooperative Banks were bound by such requirements. The ITAT considered the registration details of the assessee and previous judicial decisions regarding its status, concluding that the provisions of Rule 114E were not applicable to the assessee's case.4. Forum for appeal against penalty order under Section 271FA:The ITAT addressed the forum for appeal against the penalty order under Section 271FA. The assessee chose to file an appeal directly before ITAT, bypassing the option provided by the DIT(I&CI) to appeal before the CIT(A). The ITAT clarified that since the penalty order under Section 271FA was not directly appealable before ITAT, the proper course of action for the assessee would have been to appeal before the CIT(A) as directed by the DIT(I&CI). The ITAT emphasized that its jurisdiction was limited to statutory provisions, and the right of appeal had to be provided by law. Consequently, the appeals filed directly before ITAT were dismissed, with the assessee granted liberty to approach the relevant forum for condonation of delay, if necessary.In conclusion, the ITAT dismissed the assessee's appeals due to the non-appealable nature of the penalty order under Section 271FA before ITAT, highlighting the importance of following the prescribed appeal procedures as per statutory provisions.