2025 (7) TMI 1305 - AT - Income Tax

Penalty u/s 271(1)(c) - inordinate delay of 1039 days in filling appeal - assessee has submitted that the impugned order was not served on the assessee and only when the demand notice was issued on 10.01.2022 the assessee came to know about the penalty order passed u/s 271(1)(c) HELD THAT - Plea of the assessee that the order was not served on the assessee and only on 20.05.2025 the AO has supplied the orders passed u/s 271(1)(c) is contrary to the record. Apart from this there is a further development after the impugned orders passed by the Ld.CIT(A). The Ld.CIT(A) vide order dated 30.03.2025 has deleted the additions against which penalty u/s 271(1)(c) was levied for the A.Y.2010-11 to 2014-15 as well as remitted the matters to the record of the AO for the A.Y.2009-10 and 2015-16. It is pertinent to note that on 30.03.2025 these orders have been passed by the Ld.CIT(A) in pursuant to the orders of this Tribunal dated 09.03.2021 whereby all the matters in the quantum appeals were remanded to the record of the Ld.CIT(A) for fresh adjudication after giving an opportunity of hearing to the assessee. Thus there is material change in the matter when the Ld.CIT(A) himself has deleted the additions in some of the assessment years and set aside the additions in some of the assessment years to the record of the AO after passing the impugned orders and therefore it would be appropriate and reasonable that this new development of deletion of additions as well as setting aside some of the additions be taken into consideration by the CIT(A). Therefore we are of the considered view that the matter of condonation of delay is required to be reconsidered by the Ld.CIT(A) in light of the subsequent developments in the shape of the orders dated 30.03.2025 passed by the Ld.CIT(A) in the quantum proceedings. Appeals of the assessee are allowed for statistical purpose.

Summary

ISSUES:

Whether the delay of 1039 days in filing appeals against penalty orders under section 271(1)(c) of the Income Tax Act, 1961 can be condoned.Whether dismissal of appeals on the ground of limitation without condoning delay amounts to denial of justice.Whether confirmation of penalty under section 271(1)(c) is justified where the additions against which penalty was levied have been deleted or remanded.Whether the non-service or delayed service of penalty orders affects the limitation period for filing appeals.Whether the appellate authority erred in dismissing appeals without considering merits due to technical delay.

RULINGS / HOLDINGS:

The delay in filing appeals of 1039 days was initially not condoned by the appellate authority as the reasons given were not found reasonable or satisfactory; however, subsequent developments require reconsideration of the condonation of delay.Dismissing appeals solely on the ground of delay without condoning the delay and without hearing on merits amounts to a procedural error requiring reconsideration in the interest of justice.Confirmation of penalty under section 271(1)(c) is unjustified and highly arbitrary where the additions made by the Assessing Officer, against which penalty was levied, have been deleted or remanded by the appellate authority.The plea that penalty orders were not served prior to a certain date was found to be contrary to the record, as copies of penalty orders were filed along with appeals, indicating service had occurred earlier.The matter is remitted to the appellate authority for fresh adjudication on condonation of delay and merits of the appeals, with an opportunity of hearing to the appellant.

RATIONALE:

The court applied the provisions of section 271(1)(c) and section 246 of the Income Tax Act, 1961, governing penalty imposition and appeals respectively.The court relied on the principle that delay caused by reasons beyond the appellant's control, including the Covid-19 pandemic period, may be considered for condonation, consistent with Supreme Court rulings on extension of limitation periods during the pandemic.The court emphasized that penalty proceedings are consequential to the quantum of income assessed, and if the additions are deleted or remanded, penalty confirmation becomes untenable.The court noted inconsistency in the assessee's pleadings regarding service of penalty orders and held that such contradictions undermine the plea for condonation based on non-receipt of orders.The ruling reflects a doctrinal approach favoring substantive justice over procedural technicalities by remitting the matter for fresh consideration in light of changed circumstances and subsequent orders deleting or remanding additions.