By TIOL News Service

MUMBAI, APRIL 06, 2018: THE issue before the Bench is - Whether assessee deserves any relief from penalty only on basis of oral submission, when no defence is made either before AO or FAA regarding any defect or non application of mind for levying penalty. And the HC verdict is NO.

Facts of the case

The Revenue Department preferred the present appeal challenging the action of ITAT in entertaining a ground by an oral submission without there being any specific ground raised before it and without any defence, submission and pleadings made by the assessee at the first instance before AO, or before the CIT(A) with regard to his contention of defective show cause notice issued by the AO for penalty u/s 271(1)(c).

The HC held that,

++ the question to be answered by this Court is only about the propriety on the part of and power with the ITAT to examine the ground raised before it orally for the first time. The judgment of the Apex Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income Tax, shows that there assessee forwarded a letter and sought to raise additional grounds. The ITAT framed five questions while making reference to the Apex Court but did not examine additional grounds raised by the assessee on merits. The Apex Court therein observed that assessee should not be prevented from raising a question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item, and therefore, there is no reason to restrict the power of the Tribunal u/s 254 only to decide the grounds which arise from the order of the CIT(A);

++ coming to the present case, a perusal of the appeal memo shows that the attempt of Department is to demonstrate incomplete consideration or then non application of mind. It is claimed that the assessee, after service of notice u/s 271(1)(c) upon him, never objected to it alleging non application of mind by the AO and did not raise any question, going to its root, at the earliest or even before the CIT(A). Even before ITAT while opposing the order, no such effort was made and orally the contentions based upon omission to strike down some part or portion in notice, not applicable in the matter, were raised. Thus, the fact that such an objection which should have been raised at the earliest, was not raised before the AO imposing penalty or then before CIT (A) or then in appeal memo, is lost sight of. The impact of failure to raise it 'so', is also not evaluated;

++ the question whether such a ground needed to be taken at the first available opportunity, the impact of failure to so raise it, therefore, need to be answered in present matter. The perusal of order passed by ITAT does not show consideration of this aspect. The other contentions which pertain to merits of the matter, therefore, need not be gone into and cannot be gone into by this Court in present appeal. In present facts, when the ITAT has not looked into the effect of omission to raise such a contention at the first available opportunity, this Court is inclined to answer the question in favour of the Revenue. Accordingly, the impugned order is quashed.

(See 2018-TIOL-630-HC-MUM-IT)