2024 (12) TMI 566 - HC - Income Tax

Penalty order u/s 271(1)(c) - petitioner was not provided with any opportunity of hearing before passing the impugned order by the National Faceless Assessment Centre - HELD THAT - When the Tribunal has now passed the order on merits in the appeals filed by the petitioner as well as respondent-revenue granting substantial relief to the petitioner the respondent authorities are therefore required to consider the same for levy of penalty if any under the provisions of the Act as the impugned order passed by the respondent No. 2 is without giving any opportunity of hearing to the petitioner ignoring the requests made by the petitioner from time to time to keep the penalty proceedings in abeyance during pendency of the appeals before the Tribunal. The impugned order is therefore liable to be quashed and set aside and the matter is required to be remanded back to the respondent No. 2 to pass a fresh penalty order if any after giving an opportunity of hearing to the petitioner. The petition succeeds and is accordingly allowed in part by quashing and setting aside the impugned order dated 30.03.2022 passed by the respondents for levy of penalty u/s 271 (1) (c) of the Act and the matter is remanded back to the respondent for passing a fresh denovo order after giving an opportunity of hearing to the petitioner in accordance with law.

Issues:
Challenge to penalty order under Section 271 (1) (c) of the Income Tax Act, 1961 for lack of opportunity of hearing.

Detailed Analysis:
1. The petitioner filed a petition under Article 226 of the Constitution of India to challenge the penalty order dated 30.03.2022 imposed under Section 271 (1) (c) of the Income Tax Act, amounting to Rs. 521,45,09,094, which was 100% of the tax sought to be evaded. The petitioner contended that no opportunity of hearing was provided before passing the order by the National Faceless Assessment Centre.

2. The petitioner initially filed the original return of income for the Assessment Year 2015-16, declaring total income under normal provisions and book profit. Subsequently, the assessment was made under Section 143 (3) of the Act, resulting in a revised total income declaration. Appeals were filed by both the petitioner and the revenue before the Income Tax Appellate Tribunal challenging the CIT (Appeals) order.

3. The respondent, an Assistant/Deputy Commissioner of Income Tax, issued multiple show cause notices for penalty under the Act, to which the petitioner replied requesting to keep the penalty proceedings in abeyance until the appeals were disposed of by the Tribunal. Despite repeated requests, the respondent passed the penalty order on 30.03.2022 without granting an opportunity of hearing to the petitioner.

4. The High Court noted that the Tribunal had passed an order on merits in the appeals filed by both the petitioner and the revenue, granting substantial relief to the petitioner. The Court directed the respondent authorities to consider the Tribunal's order while deciding on the levy of penalty, as the impugned penalty order was issued without providing an opportunity of hearing to the petitioner.

5. Consequently, the High Court allowed the petition in part, quashing and setting aside the impugned penalty order and remanding the matter back to the respondent for a fresh denovo order after giving an opportunity of hearing to the petitioner in accordance with the law. The Court held that the impugned order was liable to be quashed due to the failure to provide a hearing despite the petitioner's repeated requests to keep the penalty proceedings in abeyance.

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