2022 (10) TMI 790 - AT - Income Tax

Tribunal: File appeals for penalty orders under section 271FA with CIT(A) for proper adjudication.

The Tribunal clarified that appeals against penalty orders under section 271FA should be filed with the CIT(A) and not directly with the Tribunal. The ... Tribunal jurisdiction to hear appeal - jurisdiction of this tribunal to adjudicate this appeal - Penalty levied u/s 271FA - default in filing of the AIR information within the time stipulated u/s 285BA(1) - HELD THAT:- We hold that the first appeal arising from penalty order u/s 271FA passed by AO shall lie with ld. CIT(A) and not with the tribunal, thus we dismiss appeal filed by the assessee for ay: 2015-16(fy2014-15) , with liberty to the assessee to file appeal with ld. CIT(A), if so advised, immediately on receipt of this order , and then learned CIT(A) shall condone the delay so far as time consumed by the assessee in persuing litigation with the Tribunal. However, for other delay, the assessee has to explain the same before learned CIT(A) which shall be adjudicated on merits by ld. CIT(A). With these directions, we dismiss the appeal filed by assessee, for assessment year 2015-16(financial year 2014-15). ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal (ITAT) has jurisdiction to entertain first appeals filed directly against penalty orders levied under section 271FA for default in filing AIR information required by section 285BA(1). 2. If the Tribunal lacks jurisdiction, what is the appropriate remedial course: dismissal as non-maintainable, direction to approach the appropriate appellate authority, and treatment of delay (including condonation) already incurred in approaching the Tribunal. 3. Whether established precedents and administrative clarifications (including CBDT clarification) require first appeal against penalties under Chapter XXI (including section 271FA) to be filed with the Commissioner of Income-tax (Appeals) [CIT(A)] and how such authorities' earlier contrary orders should be treated. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdiction of the Tribunal to hear first appeal against penalty under section 271FA Legal framework: Section 271FA imposes penalty for failure to furnish AIR information under section 285BA(1). Section 246A(1)(q) provides that appeals arising out of penalty orders passed under Chapter XXI lie with the CIT(A), i.e., first appeals against Chapter XXI penalty orders are to be pursued before CIT(A). Precedent treatment: Coordinate Benches of the Tribunal (including multiple Division Bench decisions cited) have held that first appeal against penalty under section 271FA lies with CIT(A) and not with ITAT; the Tribunal has applied a CBDT clarification confirming that CIT(A) has power to dispose of appeals against penalties under Chapter XXI. Interpretation and reasoning: The Tribunal concluded that section 246A(1)(q) is a residuary provision designating CIT(A) as the competent forum for first appeals against penalties under Chapter XXI. Because section 271FA is contained in Chapter XXI, appeals against orders under that section fall within the scope of section 246A(1)(q). The Tribunal rejected the proposition that a penalty order under section 271FA could be directly appealed to the ITAT, even where the penalty order issues from an officer of the rank of Director (I&CI), since the jurisdictional allocation under section 246A(1)(q) is a matter of law and not altered by administrative rank equivalence. Ratio vs. Obiter: Ratio - First appeal against penalty under section 271FA is maintainable only before CIT(A) under section 246A(1)(q); direct filing before ITAT is non-maintainable. Obiter - Observations on the possibility of bona fide belief by appellants in filing directly before the Tribunal and references to administrative rank equivalence (CBDT clarification) serve explanatory purposes but do not alter the core jurisdictional ratio. Conclusion: The Tribunal lacks jurisdiction to entertain first appeals filed directly against penalty orders under section 271FA; such appeals are non-maintainable before the Tribunal and must be filed with the CIT(A). Issue 2 - Consequences of lack of jurisdiction: dismissal, direction to file before CIT(A), and treatment of delay Legal framework: Procedural law requires that an appeal be filed before the designated appellate authority. Where an appeal is filed before an incorrect forum, the remedy is to dismiss as non-maintainable and to permit the appellant to file in the correct forum. Consideration must be given to statutory time limits and condonation powers of CIT(A). Precedent treatment: Prior Tribunal orders cited directed that appeals filed before ITAT against section 271FA penalties be dismissed and remitted to CIT(A) for fresh adjudication; such orders also directed CIT(A) to condone delay attributable to litigation before the Tribunal. Interpretation and reasoning: The Tribunal followed its earlier Division Bench decisions and other coordinate Bench precedents holding that appeals directly presented to ITAT should be dismissed as non-est. Recognizing that appellants may have had a bonafide belief in the maintainability of their ITAT filings (given prior inconsistent practice and decisions), the Tribunal provided equitable relief by permitting appellants to file fresh appeals before CIT(A) and directed CIT(A) to condone delay attributable to the time consumed in pursuing the incorrect forum. However, the Tribunal clarified that condonation would relate only to the delay caused by pursuing the Tribunal litigation; any additional delay must be explained to CIT(A) and adjudicated on merits by that authority. Ratio vs. Obiter: Ratio - Appeals filed directly with ITAT against section 271FA penalties are to be dismissed as non-maintainable and appellants given liberty to file before CIT(A). CIT(A) shall condone delay arising from the appellant's pursuit of the Tribunal. Obiter - Remarks on the existence of a bona fide belief and administrative clarifications (CBDT) are explanatory and supportive of direction to condone relevant delay, but do not displace the jurisdictional rule. Conclusion: Appeals directly filed before ITAT against section 271FA penalties are dismissed as non-est; appellants are granted liberty to file appeals before CIT(A), and CIT(A) is directed to condone the delay attributable to the time spent pursuing the now-dismissed Tribunal proceedings, while other delay must be explained and will be considered on merits by CIT(A). Issue 3 - Role of precedents and CBDT clarification in resolving forum controversy Legal framework: Interpretation of appellate forum allocation is governed by statutory provisions (section 246A(1)(q)) and may be informed by administrative clarifications where they elucidate scope and application of statute; earlier appellate orders inconsistent with statutory allocation are not authoritative to confer jurisdiction on a non-designated forum. Precedent treatment: The Tribunal relied on multiple coordinate Bench and Division Bench decisions (including earlier Tribunal orders from different benches) that converged on the view that CIT(A) is the correct first appellate forum for Chapter XXI penalties, and on a CBDT clarification confirming the power of CIT(A) to dispose of appeals against penalty orders under Chapter XXI irrespective of the rank of the officer passing the penalty. Interpretation and reasoning: The Tribunal treated the CBDT clarification and consistent Tribunal precedents as reinforcing the statutory reading of section 246A(1)(q). Where a CIT(A) had earlier dismissed appeals as infructuous or wrongly held the appeal did not lie before CIT(A), the Tribunal set aside such erroneous appellate dispositions and directed fresh adjudication by CIT(A) in accordance with law and natural justice, instructing CIT(A) to pass reasoned, speaking orders on the merits. Ratio vs. Obiter: Ratio - Administrative clarification and consistent Tribunal precedent support the statutory allocation under section 246A(1)(q) that first appeals against Chapter XXI penalties (including section 271FA) lie before CIT(A). Obiter - Observations on institutional equivalence and historical practice are explanatory; the decisive legal basis is statutory. Conclusion: CBDT clarification and Tribunal precedents confirm that first appeals against penalties under Chapter XXI (including section 271FA) must be before CIT(A); earlier contrary findings by CIT(A) or appellants' reliance on alternative practice do not confer jurisdiction on the Tribunal and will be corrected by remand for de novo adjudication by CIT(A) with appropriate directions on delay and procedural fairness. Final disposition (as applied) The Tribunal dismissed the appeals as non-maintainable for want of jurisdiction, granted liberty to file appeals before CIT(A), directed CIT(A) to condone delay attributable to litigation before the Tribunal, and confirmed that other delay must be independently explained to CIT(A) and adjudicated on merits; the Tribunal's decision follows the statutory scheme under section 246A(1)(q), applicable precedents and administrative clarification.