Gujarat HC Quashes NFAC Rectification Order u/s 154 Confirming Penalty u/s 271(1)(c)- Wrong Upload & Procedural Errors
Gujarat HC Quashes NFAC Rectification Order u/s 154 Confirming Penalty u/s 271(1)(c)- Wrong Upload & Procedural Errors
The Gujarat High Court has recently quashed a rectification order passed by the National Faceless Appeal Centre of the Income Tax Department over Procedural Errors.
The petitioner, Swapn Developers, a partnership firm, filed its income tax return (ITR) on 30.09.2013 for the assessment year 2013-2014, reporting a loss of Rs 34,36,500. But the assessing officer calculated the income of the petitioner at Rs 64,02,990 in its assessment order dated 18.03.2016. Due to this, the income tax department demanded a tax of Rs 26.90 lakhs. The department also issued the show cause notice dated 18.03.2016 for the penalty.
Petitioner filed an appeal against the assessment order under Section 246A, but the National Faceless Appeal Centre (NFAC) wrongly passed an order under Section 250 of the Act dated 16.02.2023, confirming the penalty under Section 271(1)(c) of the Act. Therefore, the petitioner preferred a rectification application under section 154 of the Act.
NFAC later rectified the error under section 154 in order 16.10.2023, but the correct order was made available on 11.07.2024, which was 17 months later. Petitioner filed an appeal before the Income Tax Appellate Tribunal (ITAT), Surat, by submitting Form 36. The NFAC passed a penalty order dated 26.07.2004, levying a penalty of Rs 30,40,401. Therefore, the petitioner preferred an appeal before the CIT(A) challenging this penalty order.
The NFAC then passed a rectification order dated 21.11.2024, where it rejected the appeal and upheld the penalty under section 271(1)(c) of the Act. Therefore, the petitioner filed an appeal before the Gujarat High Court.
The petitioner argued that the rectification order was not considered while passing the impugned order. Also, the fact that the petitioner had already appealed against that rectification order before the ITAT was also ignored. The petitioner also submitted that the order dated 21.11.2024 is invalid as the order was already rectified by the appellate authority.
The Bench comprising Mr. Justice Bhargav D. Karia and Mr. Justice Pranav Trivedi in the Gujarat High Court observed that the facts in the case are undisputed and res ipsa loquitur, which means “the thing speaks for itself“. Therefore, the court set aside the order dated 21.11.2024.