2021 (3) TMI 983 - AT - Income Tax

Validity of penalty levied under section 271C - order passed by ITO-TDS under section 201(1)/201(1A) - assessee vehemently argued that for service of notice, assessee has given the address of his Counsel for the purpose of service of notice, no notice at the address mentioned in Form-3 was served upon the counsel of assessee - HELD THAT - CIT(A) allegedly fixed the hearing on 22.08.2014 and the order was passed on 27.08.2014. In our view, no sufficient and fair opportunity was given to the assessee either by ITO-TDS or by Ld. CIT(A). Therefore, we deem it appropriate to restore the matter to the fire of AO to pass the order afresh after considering the submissions of the assessee, including the pattern of shareholding of the directors of the assessee. Needless to direct that before passing the order, the ITO, TDS shall grant fair and proper opportunity to the assessee and pass the order in accordance with law. So far as, objection of the DR for the Revenue that holding pattern shareholding should not be examined afresh, we are afraid to hear such a submission from ld. DR of the Revenue. The submission of learned DR for the revenue is not acceptable to us, which will be amounting to close the door of audi alterum pattern.

Summary

Issues:
1. Validity of order under section 201(1) r.w.s. 201(1A) passed by ITO-TDS.
2. Validity of penalty levied under section 271C of the Act.

Issue 1: Validity of order under section 201(1) r.w.s. 201(1A) passed by ITO-TDS:
The appeals by the Assessee challenged the order passed by the ld. Commissioner of Income Tax (Appeals)-4 & 3, Surat for assessment year 2008-09. The appeals were interconnected as they arose from the order passed by ITO-TDS under section 201(1)/201(1A). The Assessee contended that the order was passed without providing a fair opportunity. The Assessing Officer noted transactions that attracted provisions of section 2(22)(e) and deemed dividend, holding the Assessee liable for TDS. The Assessee failed to attend hearings and submissions, leading to confirmation of the AO's actions by the ld. CIT(A). The Assessee argued for a fair opportunity and challenged the sustainability of the order. The Tribunal found that the Assessee was not given a fair opportunity by the Lower Authorities. The matter was restored to the AO for a fresh decision after considering the Assessee's submissions, including the shareholding pattern of directors.

Issue 2: Validity of penalty levied under section 271C of the Act:
The Tribunal set aside the order passed under section 201(1) r.w.s. 201(1A), which led to the penalty under section 271C. The matter was restored to the AO for a fresh decision, rendering the penalty order invalid. The AO was granted the liberty to initiate action afresh in accordance with the law. Consequently, the appeal of the Assessee against the penalty levied under section 271C for A.Y. 2008-09 was allowed.

This judgment highlights the importance of providing a fair opportunity to the Assessee during proceedings and emphasizes the need for compliance with legal procedures and due process. It underscores the significance of proper consideration of submissions and evidence before making decisions, ensuring justice and adherence to the law.