2024 (10) TMI 1479 - HC - Income Tax

Penalty u/s 271(1)(c) - Violation of principles of natural justice in passing penalty orders without granting reasonable opportunity to the petitioner. HELD THAT - When the ITAT passed orders as early as on 09.01.2024 and 10.01.2024, it is not known as to what prevented the respondent from acting in consequent to the order passed by ITAT immediately, rather than to wait till the fag end of six months' expiry time and to issue notice on one fine day, i.e., 19.07.2024, by quantifying the penalty amount and calling upon the petitioner to pay the penalty amount, the petitioner, who has issued with such notice all of a sudden, sought for two weeks' time to putforth their contention and to file supportive documents, which the respondent refused to grant citing the expiry of time period as reason for such refusal. Thus, it is clear that the respondent remained a mute spectator for nearly five months, right from the date, on which, the orders were passed by ITAT i.e. on 09.01.2024 and 10.01.2024 and at the eleventh hour, the respondent issued notice dated 19.07.2024 and called upon the petitioner to show cause to why, penalty should not be imposed and though the petitioner appeared in person and sought time on two occasions, the respondent, without acceding to any of such request made by the petitioner, proceeded to pass orders, thereby, giving effect order to the directions issued by CIT (Appeals) and ITAT on 30.07.2024, by rejecting the submission filed by the petitioner and very next date, i.e. on 31.07.2024 passed the impugned orders imposing penalty under Section 271 (1) (c) which is in violation of principles of natural justice. Hence, this Court is inclined to set aside the impugned orders.

Summary

Issues:
Challenge to impugned orders under Section 271(1)(c) of the Income Tax Act 1961 for multiple Assessment Years; Violation of principles of natural justice in passing penalty orders without granting reasonable opportunity to the petitioner.

Analysis:
The Writ Petitions challenged the impugned orders passed by the respondent under Section 271(1)(c) of the Income Tax Act 1961 for the Assessment Years 2003-04; 2004-05; 2007-08; 2008-09 and 2009-10. The petitioner sought to direct the respondent to pass fresh orders after granting a reasonable opportunity. The petitioner contended that the impugned orders suffered from a violation of principles of natural justice as the respondent did not grant sufficient time for filing a reply and passed penalty orders abruptly. The respondent argued that the penalty order had to be passed within a specified time frame, and despite granting some time, the petitioner failed to utilize the opportunity effectively.

The Court considered the submissions made by both parties and examined the records. It noted that the petitioner had filed Appeals before CIT (Appeals) NFAC, which were partly allowed, and subsequently filed second Appeals before the Income Tax Appellate Tribunal (ITAT), where the Appeals were partly allowed as well. The Court observed that the respondent delayed taking action on the ITAT orders and issued a notice quantifying the penalty amount abruptly on 19.07.2024, without granting sufficient time for the petitioner to respond. Despite the petitioner's requests for time, the respondent proceeded to pass penalty orders on 31.07.2024, rejecting the petitioner's submissions. The Court found this approach to be a violation of principles of natural justice.

Consequently, the Court set aside the impugned orders dated 31.07.2024 and remanded the matters back to the respondent for fresh consideration. The petitioner was directed to file all relevant documents within three weeks, and the respondent was instructed to grant a 21-day notice for a personal hearing. The respondent was further directed to consider the documents and pass final orders in accordance with the law and the ITAT orders. The Writ Petitions were allowed, with no costs imposed, and connected Miscellaneous Petitions were closed.