ITAT Mumbai Orders Fresh Consideration of Reassessment and Penalty Where Income Was Allegedly Offered Under Another PAN

Background of the Dispute

The Income Tax Appellate Tribunal, Mumbai Bench, in the case of Savera Construction Co. Vs ACIT (ITAT Mumbai), dealt with two connected appeals filed by the assessee, a partnership firm, for Assessment Year 2016-17.

Both appeals arose from separate orders passed by the National Faceless Appeal Centre (NFAC), Delhi:

  • One appeal related to the quantum assessment under Section 147 of the Income Tax Act 1961
  • The other concerned penalty proceedings under Section 271(1)(c) of the same Act

In both matters, the assessee challenged ex parte orders of the first appellate authority, alleging that the appeals were decided without granting proper and adequate opportunity of hearing, and that the factual contention regarding disclosure of the impugned income under a different PAN was never examined.

Initiation of Reassessment Proceedings Under Section 147

Information Triggering Reopening

The Assessing Officer (AO) received information through the department’s INSIGHT system that the assessee had executed a sale of an immovable property during the relevant year for a total consideration of ₹67,25,000.

According to the AO:

  • No return of income had been filed by the assessee for A.Y. 2016-17
  • The property transaction indicated potential escapement of income

On this basis, the AO initiated reassessment proceedings under Section 147 of the Income Tax Act 1961.

Non-compliance and Ex Parte Assessment

During the reassessment:

  • The AO issued several statutory notices to the assessee
  • As recorded by the AO, none of these notices were complied with
  • There was no appearance or submission from the assessee at the assessment stage

As a result, the AO proceeded to complete the assessment ex parte, to the best of his judgment.

Addition Made by AO

In the ex parte assessment order, the AO:

  • Treated the entire sale consideration of ₹67,25,000 as short-term capital gain
  • Brought this amount to tax in the hands of the assessee

Subsequent to completion of the reassessment, the AO further initiated penalty proceedings for:

  • Concealment of income, or
  • Furnishing inaccurate particulars of income

under Section 271(1)(c).

Penalty Order Under Section 271(1)(c)

Imposition of Penalty

Following the reassessment, the AO completed the penalty proceedings and:

  • Levied penalty under Section 271(1)(c) on the alleged concealed income
  • Treated the conduct of the assessee in not filing a return and not responding to notices as grounds for the penalty

Challenge Before First Appellate Authority

The assessee filed separate appeals before the first appellate authority (NFAC, Delhi):

  1. Against the reassessment order making the addition of ₹67,25,000 as short-term capital gain
  2. Against the penalty order passed under Section 271(1)(c)

However, both these appeals were eventually dismissed ex parte by the NFAC, allegedly in the absence of the assessee.

Core Contention of the Assessee Before ITAT

Claim of Income Disclosure Under a Different PAN

Before the ITAT, the assessee put forth a crucial factual plea: