The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, on the reopening of an assessment based on change of opinion, quashed the penalty against the assessee who had correctly declared the Income.
The aforesaid observation was made by the Ahmedabad ITAT, when an appeal was filed by the Assessee, as against the Appellate order dated 20.09.2022, passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (NFAC), confirming the levy of penalty under Section 271(1)(c) of the Income Tax Income Tax Act, 1961, relating to the Assessment Year (A.Y) 2008 – 09.
The brief fIncome Tax Acts of the case were that the assessee filed its Return of Income for the Assessment Year 2008-09, declaring total income at Rs. Nil and claiming current year loss of Rs. 12,85,67,801/-. Regular assessment was completed under Section 143(3) determining the total losses of Rs. 5,06,04,324/- (under normal provision) and book profit under Section 115JB of the Income Tax Act was determined at Rs. 2,77,73,370/-.
Thereafter the assessee’s case was reopened under Section., determining the total income at Rs. 10,96,93,680/- after making addition of Rs. 16.02 crores, on account of prior period expenses. The Assessing Officer also initiated penalty proceedings for furnishing inaccurate particulars of income.
The assessee filed an appeal against the re-assessment order on the disallowance of prior period expenses, which was ultimately dismissed. It is thereafter the Assessing Officer initiated penalty proceedings, confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act of Rs. 5,44,85,300/- for furnishing inaccurate particulars of income.
Aggrieved against the penalty order, the assessee filed an appeal before the CIT(A), who also dismissed the assessee appeal and confirmed the levy of penalty under Section 271(1)(c) of the Income Tax Act, thereby leaving the assessee with the only option of preferring the instant appeal before the tribunal.
Hearing the opposing contentions of both sides as submitted by Shri M.K. Patel, the A.R. on behalf of the assessee, and by Shri Samir Sharma, the CIT-DR., on behalf of the Revenue, and thereby perusing the materials available on record, the ITAT observed:
“We have given our thoughtful consideration and perused the materials available on record. As held by the Co-ordinate Bench of this Tribunal, the very reopening of assessment itself is bad in law. Based on change of opinion and there is no failure on the part of the assessee in declaring its income.”
“Since the quantum appeal itself is being quashed, the penalty levied as against the reassessment order for furnishing inaccurate particulars has no legs to stand and the same is liable to be quashed”, the coram of Waseem Ahmed, the Accountant Member, and T.R Senthil Kumar, the Judicial Member added.
Finally, the Ahmedabad ITAT held:
“Thus, the grounds raised by the Assessee is hereby allowed. In the result, the appeal filed by the Assessee is allowed.”
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