2018 (5) TMI 2187 - AT - Income Tax

Penalty u/s 271C - no valid notice was issued and served upon the assessee before imposition of penalty - delay in filing the quarterly e-TDS returns - HELD THAT - Under Section 274 (1) of the Act, no order imposing penalty under this Chapter shall be made unless the assessee has been heard or has been given reasonable opportunity of being heard . But, in the instant case, when undisputedly, no notice has been issued to the assessee, who has duly communicated the change of its name and address of its registered office and consequently change in TAN particulars were also carried out by the Revenue department in the records, the penalty levied by the AO is not sustainable in the eyes of law on this score only. Delay in issuing notice - Hon ble Delhi High Court in Kareemul Hajazi vs. State of NCT of Delhi 2011 (1) TMI 1596 - DELHI HIGH COURT held that the period of six months prescribed u/s 275(1)(c) of the Act ought to be treated as reasonable period for issuance of such show-cause notice. So, the ld. CIT (A) has rightly concluded that even show cause notice has been issued with inordinate delay and as such, penalty is not sustainable. Since company known as Infovision Information Services Pvt. Ltd was not in existence on which the show-cause notice was issued and the assessee company has never been informed, if any such penalty proceedings are initiated against it, the penalty levied by AO is not sustainable. Even otherwise, when status of the assessee after change of name and address of its registered office stood inextricably mixed up with the identity of Infovision Information Services Pvt. Ltd and no notice has been served upon the assessee, the defect is incurable. Even otherwise, the ld. DR has not brought on record any document if valid notice was ever issued or served upon the assessee, so order of penalty passed by the AO without issuance and service of a valid notice upon the assessee is illegal, void ab initio, hence no order in the eyes of law.

Summary

Issues:
Validity of penalty imposition due to lack of valid notice issuance.

Analysis:
The case involved the appellant, an Income-tax Officer, seeking to set aside impugned orders passed by the Ld. CIT (Appeals) for Assessment Years 2006-07, 2007-08 & 2008-09. The key issue was whether a valid notice was issued and served upon the assessee before the imposition of penalties. The appellant contended that penalties were warranted due to non-compliance with TDS provisions, while the assessee argued that penalties were deleted by the Ld. CIT (A) for lack of a valid notice.

The Tribunal found that the penalties were levied ex-parte by the AO without issuing a valid notice to the assessee. The assessee had duly communicated changes in its name and address to the department, which updated the records accordingly. As per Section 274(1) of the Act, no penalty order can be made without giving the assessee a reasonable opportunity to be heard. Since no notice was issued despite the changes being communicated, the penalties were deemed unsustainable solely on this ground.

Moreover, the Tribunal considered the delay in initiating the penalty proceedings. Citing precedents, it noted that the delay of over 5 years in issuing the notice rendered the penalty order invalid. The Tribunal also referenced a High Court decision that deemed a six-month period as reasonable for issuing show-cause notices. Given the inordinate delay in this case, the Tribunal upheld the Ld. CIT (A)'s decision to delete the penalties.

The Tribunal emphasized that the assessee, after changing its name and address, was not properly informed of the penalty proceedings initiated against it. The absence of a valid notice rendered the penalty order illegal and void ab initio. The Tribunal concluded that the penalties were rightly deleted by the Ld. CIT (A) without delving into the merits of the case, as no illegality or perversity was found in the impugned orders. Consequently, all appeals filed by the Revenue were dismissed.

In conclusion, the Tribunal upheld the deletion of penalties due to the lack of a valid notice and the significant delay in initiating penalty proceedings, emphasizing the importance of procedural fairness and adherence to legal requirements in penalty imposition cases.