HC directs AO to revise penalty orders in light of  fresh/revised assessment orders

P.M. Abdul Nazeer Vs ACIT (Kerala High Court)

Introduction: The Kerala High Court, in the case of P.M. Abdul Nazeer vs ACIT, issued a directive for the revision of penalty orders (Ext. P5 to P11) dated 31.03.2023. The penalty was imposed under Sections 271(1)(c) and 271AAB of the Income Tax Act, 1961, for the assessment years 2008-09 to 2014-15. The court’s decision stems from the petitioner’s plea to quash the penalty orders based on a fresh assessment.

Detailed Analysis: The respondent had passed assessment orders on 31.03.2016, leading to the issuance of show cause notices for penalties under Sections 271(1)(c) and 271AAB. The petitioner filed replies to the notices and appealed the assessment orders before the CIT(A). While the appeals were pending, penalty proceedings were temporarily halted. Subsequently, the CIT(A) dismissed the appeals on 02.12.2021, reviving the penalty proceedings.

Upon approaching the Income Tax Appellate Tribunal, the petitioner secured modifications to the assessment orders, prompting a remand to the assessing officer for fresh assessment. The crux of the petitioner’s argument was that, following the revised assessment, the penalty orders needed revision. The court acknowledged this contention, and the standing counsel for the Income Tax Department did not contest the need for penalty revision post the fresh assessment.

In light of the petitioner’s submission and the agreement of the Income Tax Department’s counsel, the Kerala High Court directed the respondent to revise the penalty orders. Importantly, the petitioner must be given a hearing under Section 75(1)A before the revision. The court emphasized the expeditious handling of the proceedings, ideally within one month.

Conclusion: The Kerala High Court’s decision in the P.M. Abdul Nazeer vs ACIT case underscores the principle that penalty orders must align with fresh or revised assessment outcomes. The judgment provides relief to the petitioner, mandating a fair opportunity for a hearing during the revision process. This case highlights the interplay between assessment and penalty proceedings, ensuring procedural fairness and adherence to statutory provisions.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The present writ petition has been filed for quashing of Exts. P5 to P11 penalty orders dated 31.03.2023 passed by the respondent against the petitioner in respect of the assessment years 2008-09 to 2014-15 under Sections 271(1)(c) and 271AAB of the Income Tax Act, 1961. The assessment order in respect of the assessment year 2008-09 to 2014-15 were passed on 31.03.2016 and for penalty proceedings show cause notices were issued under Section 271(1)(c) for the assessment years 2008-09 to 2013-14 and for the assessment year 2014-15, notice under Section 271AAB was issued. The petitioner-assessee had filed reply to the said show cause notices. The petitioner had filed appeals against the said assessment orders before the CIT(A). During the pendency of the appeals before the CIT(A), the penalty proceedings were kept in abeyance. The CIT (A) has vide common order dated 02.122021 dismissed the appeals affirming the assessment orders. Since as the appeals got dismissed, the penalty proceedings revived and the petitioner was issued with notices on 27.03.2023. Aggrieved by the order passed the CIT(A), the petitioner has approached the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal had modified the assessment orders and remanded the matter to the assessing officer vide Ext.P1 order for passing a fresh assessment order. The learned counsel for the petitioner submits that on remand, fresh assessment order can be passed and in view of the fresh assessment orders passed, the penalty orders may be revised.

2. The learned Standing Counsel for the Income Tax Department does not dispute this fact that in light of the fresh assessment orders passed on remand, the penalty orders have to be revised. Thus, considering the aforesaid fact and the stand of the learned counsel for the Income Tax Department as well as the submission advanced on behalf of the learned counsel for the petitioner, the present writ petition is disposed of, with a direction to the respondent to revise the penalty orders in light of the fresh/revised assessment orders passed in respect of the assessment year 2008-09 to 2014-15 on remand. The petitioner should be afforded an opportunity of hearing as provided under Section 75(1)A before revising the penalty orders. Needless to mention that the Assessing Officer shall expedite the proceedings for revising the penalty orders, preferably within a period of one month.