CA made a big mistake by withdrawing appeal against the penalty order on winning quantum appeal. CIT(A) was not justified to dismiss appeal as withdrawn and not deciding it on merits – ITAT
ABCAUS Case Law Citation:
ABCAUS 2506 (2018) 09 ITAT
Important Case Laws Cited/relied upon by the parties:
Bhartia Steel & Engineering Co. Pvt. Ltd.
The instant appeal was filed by the appellant assessee challenging the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (the Act).
The assessment was completed under section 147 read with section 143(3) of the Act with additions u/s 68 of the Act.
The CIT(A) dismissed the appeal of assessee.
Thereafter, the Assessing Officer (AO) initiated the penalty proceedings under section 271(1)(c). The assessee-company submitted before the AO that it had preferred an appeal before the ITAT, therefore, penalty may be kept in abeyance. However, the AO decided the penalty matter and levied the penalty on the aforesaid addition.
While the appeal against the penalty order was still pending before the CIT(A), the Tribunal allowed the quantum appeal of the assessee and quashed the reassessment proceedings. The Chartered Accountant who was representing the assessee before the CIT(A) submitted that the impugned penalty order has become non est and therefore, the assessee-company wished to withdraw this appeal. It was therefore, prayed before CIT(A) to accept the withdrawal of the appeal filed by the assessee-company.
The CIT(A) in view of the request of the assessee-company, dismissed the appeal of assessee-company as withdrawn.
Sooner, realising the mistake committed by it. The company was in appeal before the Tribunal, challenging the penalty order.
It was submitted that the CIT(A) should not have dismissed the appeal of the assessee-company as withdrawn. It was submitted that CA of Assessee had made a request for withdrawal of the appeal without consent of the assessee-company and that it was a mistake committed by the Counsel. It was also submitted that once re-assessment order had been quashed, the authorities below were bound to modify the penalty order in terms of Section 275(1A) of the Act.
The Tribunal observed that in view of the quashing of the additions itself, there was no justification for levy of the penalty against the assessee-company in such circumstances. As rightly contended, even as per Section 275(1A), the penalty shall have to be modified in terms of the quantum Order passed on the appeal decided by ITAT. Once, the re-assessment order have been quashed and no additions survives, the authorities below shall have to modify the penalty order by cancelling the penalty in the matter.
The Tribunal opined that the CA of the assessee committed a blatant mistake by making a request for withdrawal of the appeal. However, she explained all the facts before CIT(A) that the Tribunal had quashed the reassessment order and as such, all additions stands deleted. The assessee-company also pleaded in the same letter before CIT(A) that suitable action may be taken and assessee company may be intimated of any obligation required to be discharged on its part. Therefore, in such circumstances, the CIT(A) instead of allowing the withdrawal of the appeal through Counsel for Assessee, should have cancelled the penalty order.
The Tribunal opined that even if the Counsel for Assessee had committed a blatant mistake that should not have been allowed to continue by the First Appellate Authority and he was required by Law to follow the Order of the Tribunal to do substantial justice between the parties. Thus, there were no justification for CIT(A) to dismiss the appeal of assessee-company as withdrawn because it is well settled Law that assessee-company having once filed an appeal cannot withdraw it. The assessee company under such circumstances was fully justified for filing appeal before the Tribunal.
The Tribunal rejected the contention that assessee-company cannot file appeal before the Tribunal in such circumstances.
The Tribunal set aside the Orders of the authorities below and cancelled the penalty.