2025 (6) TMI 962 - AT - Income Tax

Penalty u/s.272A(2)(e) - assessee was found in default for not filing return of income on or before the due date as required u/s.139(4C) - HELD THAT - CIT(Appeals)/NFAC may look into that as claimed by the assessee since they are having exemption u/s.10(23C)(iiiad) of the Act therefore they are not supposed to file return of income whether this claim is tenable as per law. That as per record the assessee had put the blame on the department for issuing notice after 8 years rather than explaining the reasonable cause that why such penalty should not be levied on the assessee. Therefore the assessee shall also explain as to why the said penalty should not be levied with reasons and evidences before the Ld. CIT(Appeals)/NFAC. Matter restored back before the Ld. CIT(Appeals)/NFAC for denovo adjudication on merits.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 6 days in filing the appeal before the Ld. CIT(Appeals)/NFAC should be condoned.

- Whether the penalty under Section 272A(2)(e) of the Income Tax Act, 1961, imposed for failure to file the return of income on or before the due date under Section 139(4C), is justified in the facts of the case.

- Whether the claim of exemption under Section 10(23C)(iiiad) of the Income Tax Act exempts the assessee (a charitable trust) from the obligation to file the return of income, thereby negating the basis for penalty.

- Whether the Ld. CIT(Appeals)/NFAC complied with the procedural requirements under Sections 250(4) and 250(6) of the Income Tax Act while dismissing the appeal and imposing penalty.

2. ISSUE-WISE DETAILED ANALYSIS

Delay in Filing Appeal

Relevant Legal Framework and Precedents: Section 250 of the Income Tax Act governs the appellate proceedings before the Commissioner of Income Tax (Appeals). Subsections (4) and (6) mandate adherence to procedural safeguards, including consideration of condonation of delay. The Supreme Court's decisions in Vidya Shankar Jaiswal v. ITO and Inder Singh v. State of Madhya Pradesh emphasize a justice-oriented and liberal approach in condoning delays in filing appeals.

Court's Interpretation and Reasoning: The Tribunal observed that the delay of 6 days was minimal and adequately explained by the assessee, who operates a charitable trust in a small town with limited staff familiarity with electronic filing portals. The Ld. CIT(Appeals)/NFAC had summarily dismissed the appeal solely on the ground of delay without considering the merits or conducting further inquiry as mandated by Sections 250(4) and (6). The Tribunal held that such dismissal was contrary to the procedural mandate and the principles laid down by the Supreme Court.

Key Evidence and Findings: The assessee's explanation regarding the delay was based on the operational limitations of the charitable trust's staff and the rural location. The Ld. CIT(Appeals)/NFAC rejected this explanation as mere assertions without cogent evidence, but the Tribunal found this rejection to be unjustified in light of the minimal delay and the nature of the assessee's operations.

Application of Law to Facts: Applying the principles from the cited Supreme Court rulings, the Tribunal condoned the delay of 6 days and remanded the matter for de novo adjudication on merits.

Treatment of Competing Arguments: The Revenue's position was that delay should not be condoned due to lack of sufficient evidence supporting the assessee's explanation. The Tribunal rejected this, emphasizing a liberal approach and procedural fairness.

Conclusion: Delay of 6 days in filing the appeal before the Ld. CIT(Appeals)/NFAC is condoned, and the appeal is remanded for fresh consideration on merits.

Validity of Penalty under Section 272A(2)(e) for Failure to File Return

Relevant Legal Framework and Precedents: Section 272A(2)(e) imposes penalty for failure to file the return of income within the prescribed time under Section 139(4C). Section 10(23C)(iiiad) exempts certain charitable trusts from income tax, which may affect the filing obligations. Principles of natural justice must be followed in penalty proceedings.

Court's Interpretation and Reasoning: The Tribunal directed the Ld. CIT(Appeals)/NFAC to examine whether the assessee's claim of exemption under Section 10(23C)(iiiad) legally absolves it from filing the return, thereby negating the penalty basis. The Tribunal noted that the assessee had not satisfactorily explained the reasonable cause for delay or non-filing but had instead blamed the department for issuing notice after 8 years, which is irrelevant to the penalty question.

Key Evidence and Findings: The record showed the assessee failed to file the return on time and did not provide a cogent explanation to avoid penalty. However, the exemption claim under Section 10(23C)(iiiad) was raised and required verification.

Application of Law to Facts: The Tribunal instructed that the Ld. CIT(Appeals)/NFAC consider the exemption claim's tenability and require the assessee to provide reasons and evidence why penalty should not be imposed. The Tribunal emphasized adherence to principles of natural justice in the fresh adjudication.

Treatment of Competing Arguments: The Revenue maintained the penalty was justified due to default in filing. The assessee argued exemption and procedural delays but failed to provide substantive cause. The Tribunal balanced these by remanding for proper inquiry.

Conclusion: The penalty issue is to be reconsidered on merits after examining exemption applicability and reasons for non-filing, with due process observed.

Procedural Compliance under Sections 250(4) and (6)

Relevant Legal Framework and Precedents: Sections 250(4) and (6) require the appellate authority to conduct inquiry and consider evidence before deciding appeals, especially when delay is involved.

Court's Interpretation and Reasoning: The Tribunal found that the Ld. CIT(Appeals)/NFAC failed to comply with these provisions by dismissing the appeal in limine without inquiry or consideration of merits.

Key Evidence and Findings: The order of the Ld. CIT(Appeals)/NFAC itself indicated no inquiry was conducted, and no evidence was considered.

Application of Law to Facts: Non-compliance with mandatory procedural safeguards rendered the order unsustainable.

Treatment of Competing Arguments: The Revenue did not dispute procedural lapses but relied on delay and lack of evidence. The Tribunal held procedural compliance paramount.

Conclusion: The procedural lapses necessitate remand for fresh adjudication with full compliance.

3. SIGNIFICANT HOLDINGS

- "The Ld. CIT(Appeals)/NFAC had blatantly and summarily dismissed the appeal while not condoning the delay in limine without going into the merits of the case... has not adhered to mandate of Section 250(4) and (6) of the Act and thereby, has not conducted any further inquiry while arriving at its decision."

- "A justice oriented and liberal approach ought to be adopted while considering the aspect of condoning the delay involved in filing of the appeal."

- The Tribunal's final determination to condone