Divine Chemtec Limited Vs Income Tax Department (Andhra Pradesh High Court)
In the case of Divine Chemtec Limited vs Income Tax Department, as heard in the Andhra Pradesh High Court, The court examines the penalty order issued by the National Faceless Assessment Centre, Delhi, and evaluates whether it violates the principle of natural justice.
Analysis: The petitioner, Divine Chemtec Limited, challenges the penalty order proposed by the Income Tax Department under Section 271(1)(c) of the Income Tax Act. The petitioner argues that the penalty order is unwarranted as there was neither concealment of income nor furnishing of inaccurate particulars. They contend that the revised return, filed in response to the proceedings under Section 153A of the IT Act, was accepted by the department, rendering the previous return filed under Section 139 insignificant. The petitioner asserts that the penalty proceedings were initiated based on the earlier return, which is not maintainable. The respondent, Income Tax Department, opposes the writ petition, arguing that an effective alternative remedy of appeal is available to the petitioner and that the penalty was rightfully imposed due to the petitioner’s earlier misleading return.
The court examines the contentions of both parties and reviews the record, including the reply notices submitted by the petitioner. It is observed that the crucial pleas raised by the petitioner in their reply notice dated 31.05.2021 were not adequately addressed or considered in the impugned penalty orders. The court concludes that the non-consideration of these pleas amounts to a partial violation of principles of natural justice. Furthermore, the petitioner’s request for a personal hearing was not accorded due attention. Although the availability of an alternative remedy through an appeal is generally considered a bar to filing a writ petition, the court recognizes that in cases involving violations of natural justice, the constitutional courts can entertain writ petitions despite the existence of an alternative remedy.
Conclusion: In conclusion, the Andhra Pradesh High Court sets aside the impugned penalty orders passed by the Income Tax Department and remits the case back to the department. The court directs the department to reconsider the petitioner’s reply notices, particularly the crucial contentions raised, and provide the petitioner with an opportunity for a personal hearing. The court emphasizes that the petitioner must deposit 25% of the penalty amount within six weeks of receiving the court’s order. Failure to comply will result in the cancellation of this order. It is worth noting that while an alternative remedy exists through the appeals process, the court’s decision to entertain the writ petition is justified due to the partial violation of principles of natural justice.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
Challenge in the writ petition No.11604 of 2022 is to the order in DIN No. ITBA/PNL/F/271(1)(c)/ 2021-22/ 1041194359(1), dated 21.03.2022 passed by National Faceless Assessment Centre, Delhi of the respondents whereunder it was proposed to impose a penalty of Rs.58,72,241/- U/s 271(1)(c) r/w Section 274(2) of Income Tax Act, 1961 ( for short “IT Act”).
2. Petitioner’s case succinctly is thus:
(a) Petitioner is a company incorporated and registered under the provisions of Companies Act, 2013.
(b) On 20.09.2017 search operations were conducted in the premises of the petitioner U/s 132 of IT Act and notice was issued on 30.08.2018 U/s 153A of the IT Act calling for its return from income.
(c) During search operation, the Managing Director of petitioner, on verification of Audit and Balance Sheet of the petitioner company noticed an inadvertent error in the books of accounts in the Financial Year ending 31.03.2009 wherein a Foreign Investment was capitalized against Plant and Machinery, though the same did not materialize for various reasons. Since mistake was occurred in the Financial Year ending 31.03.2009, it was continued unnoticed and same was corrected in the Financial Year ending 31.03.2015 for the Assessment Year 2015-16.
(d) Pursuant to the notice U/s 153A, the petitioner on 23.09.2018 filed return declaring therein a loss of Rs.5,50,06,514/- and the same was assessed U/s 143(3) r/w Section 153A of the IT Act by the order dated 30.12.2019 accepting the income in the return filed in the assessment order. The AO through recorded his satisfaction, however initiated penalty proceedings U/s 271(1)(c) r/w explanation 5A for furnishing inaccurate particulars of income by placing the reliance on original return of income filed U/s 139(1) of the IT Act.
(e) Accordingly, a show cause notice dated 03.01.2020 was issued U/s 274 of IT Act to which the petitioner submitted its reply dated 03.02.2020 denying all the allegations. The petitioner has specifically drawn the attention about the satisfaction of the AO which is a sine quoa non for levying the penalty for furnishing inaccurate particulars of income whereas show cause notice was issued for concealment of income thereby rendering the show cause notice baseless.
(f) On 19.02.2020 the petitioner filed additional reply to the show cause notice dated 03.01.2020. However, 1st respondent failed to take cognizance of both the replies.
(g) In terms of the notification dated 12.01.2021, Faceless Penalty Scheme – 2021 was notified by the Central Board of Direct Taxes and accordingly a show cause notice was issued on 24.05.2021 by the National Faceless Assessment Centre to the petitioner. The petitioner submitted reply on 26.05.2021 and also a supplemental reply dated 31.05.2021. Thereafter the petitioner did not receive any communication but a penalty order dated 21.03.2022 was received without granting opportunity of hearing though in the supplemental reply dated 31.05.2021, a specific request was made for personal hearing.
(h) The imposition of penalty is in total violation of Sub Clause-XV of Clause-I of para-5 of the Faceless Assessment Scheme. The petitioner submitted its grievance on the portal maintained by respondent No.2 on 26.03.2022 but same remained unresponded.
Hence the writ petition.
3. It may be noted that with the identical averments the petitioner filed W.P.Nos.11593, 11818, 11596 and 11923 of 2022. The only difference in all the above five writ petitions is the assessment year and loss claimed and penalty levied which are shown in a tabular form as below:
