2021 (1) TMI 632 - AT - Income Tax

Tax Appeals: Procedural Fairness Emphasized in Penalty Dispute Decision

The ITAT allowed the appeals against the CIT(A)'s orders for A.Ys. 2006-07 & 2007-08 regarding penalties under section 271(1)(c) of the Income Tax ... Penalty u/s. 271(l)(c) - assessee argued that the CIT(A) has decided the matter of controversy in absence of the assessee and without giving an opportunity of being heard to the assessee in accordance with law - HELD THAT:- Order of the CIT(A) in question is wrong against law and facts and is liable to be set aside. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. On appraisal of the order of the CIT(A) dated 13.02.2017, we noticed that the CIT(A) decided the matter of controversy in absence of the assessee without giving an opportunity of being heard to the assessee. It is against the principle of natural justice. A proper and reasonable opportunity is required to be given to the assessee before the deciding the matter of controversy in accordance with law. The order of the CIT(A) is not liable to be sustainable in the eyes of law, therefore, we set aside the finding of the CIT(A) on all the issues and restored the matter before the CIT(A) to decide the matter afresh by giving an opportunity of being heard to the assessee in accordance with law. Apeals filed by the assessee are hereby allowed statistical purposes. Issues:Appeal against order passed by CIT(A) for A.Ys. 2006-07 & 2007-08; Penalty u/s. 271(1)(c) of the Income Tax Act, 1961; Absence of assessee during CIT(A) proceedings; Violation of natural justice principles.Analysis:1. The assessee filed appeals against the CIT(A)'s orders for A.Ys. 2006-07 & 2007-08, challenging the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The grounds raised by the assessee included contentions on the legality of the CIT(A)'s order, the initiation of penalty proceedings, and the lack of concealment found in the original assessment order.2. The brief facts of the case revealed that the assessee initially declared income of Rs. 1,07,99,899/-, later revised to Rs. 3,34,36,493/-. Following DRP directions, the total income was assessed at Rs. 4,80,19,930/- under normal provisions and Rs. 1,97,48,820/- under section 115JB. Various additions were made, leading to the invocation of penalty provisions under section 271(1)(c) by the AO, resulting in a penalty of Rs. 14,10,000/-.3. During the hearing, the assessee did not present arguments on merits but contended that the CIT(A) decided the case in their absence, violating natural justice principles. The ITAT observed that the CIT(A) indeed decided the matter without giving the assessee an opportunity to be heard, contrary to legal requirements and principles of natural justice.4. Citing relevant case laws, the ITAT held that the absence of the assessee during CIT(A) proceedings and the lack of opportunity to present their case infringed upon the fundamental right to a fair hearing. Consequently, the ITAT set aside the CIT(A)'s findings on all issues and remanded the case back to the CIT(A) for fresh consideration after affording the assessee a proper opportunity to be heard.5. The ITAT's decision applied to the appeal for A.Y. 2007-08 as well, given the similar nature of the controversy. Therefore, both appeals were allowed, emphasizing the importance of upholding procedural fairness and ensuring that parties have the chance to present their case effectively.In conclusion, the ITAT's judgment highlighted the significance of adhering to procedural fairness and natural justice principles in tax proceedings, emphasizing the right of parties to be heard before decisions are made. The decision underscores the importance of providing a fair opportunity for all parties to present their arguments and defend their positions before final judgments are rendered.