Case Law Details
Antony Madassery Vs DCIT (ITAT Amritsar)
The Income Tax Appellate Tribunal (ITAT) in Amritsar recently deleted penalties under sections 271(1)(b) and 272A(1)(b) in the case of Antony Madassery Vs Deputy Commissioner of Income Tax (DCIT). The case revolved around the improper procedure followed in the issuance of income tax notices, resulting in penalties being levied on the assessee.
This judgment underscores the importance of proper procedure in the issuance of income tax notices. It demonstrates how overlooking such procedures can lead to unlawful levies of penalties. The case focused on the fact that the Assessing Officer (AO) had failed to issue a specific notice with points of special audit to the appellant assessee under section 142(2A) of the Act, with the approval of the Principal Commissioner of Income Tax (PCIT).
This ruling is consistent with the decision in the case of “Navjeevan Charitable Society” where a similar situation had arisen. The bench of the ITAT in that case held that merely writing letters to the assessee without mentioning the issues or points for special audit and without taking prior approval from the PCIT was bad in law.
The deletion of penalties in this case reiterates that tax authorities must adhere strictly to procedures and norms, and any violation thereof can lead to legal consequences, including the invalidation of penalties levied.
The decision by ITAT Amritsar in Antony Madassery Vs DCIT reaffirms the importance of following proper procedures while issuing income tax notices. This case demonstrates how non-compliance with established procedures can lead to penalties being invalidated.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The bunch of appeals have been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana even dated 26.12.2022 in respect of AYs 2013-14 to 2019-10, challenging therein the confirmation of levy of penalty u/s 271(1)(b) and 272A(1)(b) of the Act.
2. At the outset, the ld. counsel for the assessee has submitted that the bunch of appeals are covered matter on identical facts, by the ITAT judgment delivered vide order dated 20.03.2023, in the case of Navjeevan Charitable Society v. Dy. CIT CC-2, Jalandhar in ITA No. 215/Asr/2022.
3. The Ld. DR stands by the CIT(A) but he did rebut to AR’s contention that it is covered matter by coordinate bench as above.
4. Having heard both the sides and on perusal of records, it is seen that the content of notices issued by the AO and the contents discussed by the ld. CIT(A) in the impugned orders are identical in verbatim in ITA Nos. 220 to 226/Asr/2022 except the section that in ITA Nos. 224 to 226/ASr/2022 the levy of penalty u/s 272A(1)(b), wherein ITA Nos. 220 to 223/Asr/2022, the AO levied penalty u/s 271(1)(b). It is pertinent to mention here that the AO has written a letter to M/s Surendra Mahajan and Associates for special audit of four case including the appellants but, the AO had never issue a specific notice with points of special audit to the appellant assesse u/s 142(2A) of the Act with the Approval of the PCIT. The AO has merely written letters to the assessee without mentioning the issues/points, regarding propose of its case for special audit and it was without taking the prior approval of the PCIT is bad in law.
5. The relevant para of the ITAT judgment in case of “Navjeevan Charitable Society”, (Supra) is reproduced hereunder:
“That the facts and circumstances of the case as well as in law, is squarely covered by the decision of the of the Hon’ble bench in the case of Navjeevan Charitable Society V. DCIT Central Circle-1, Jalandhar dated 20.03.2023 in ITA 215/Asr/2022 wherein it was held as under:
“7. Heard the rival contentions, perused the material on record and written submission on record. Admittedly, the AO has written letters dated 06.05.2021. 25.05.2021, 11.06.202! & 22.06.2021 which are not “direction ” issued u/s 142(2A), with the approval of Ld PC1T, as neither such particulars have been prescribed for which the exercise of special audit was to be undertaken with the prior approval of PC1T nor the assessee provided a reasonable opportunity of being heard as per section 142(2A) and proviso thereto. In our view, merely writing letters to the assessee without mentioning the issues/points, proposed for special audit: without taking the prior approval of the PCIT is bad in law: Therefore, penalty of Rs, 40,000/- levied u/s 272(1)(d) vide order dated 31.07.2021 is illegal and unjustified.
8. The Ld. CIT(A) has failed to appreciate the fact that the letters of communication of special audit in the present case were no “direction” u/s 142(2A) ever issued to the assessee during the course of assessment proceedings, containing particulars for which the exercise of special audit was to be undertaken and further, the Ld. AO has admitted in order u/s 154 dated 09.11.2021 that letters dated 06.05.2021, 25.05.2021, 11.06.2021 & 22.06.2021 are not “direction ” issued u/s 142/2A) but are letters in continuation of notice u/s 142(2A) issued on 24.02.2021.
9. It is pertinent to mention here that the AO has written a letter to M/s Surendra Mahajan and Associates as above. for special audit of four case including the appellants but, the AO had never issue a specific notice with point of special audit to the appellant assesse u/s 142(2A) of the Act with the Approval of the PCIT. In view of the matter we hold that there was no failure on the part of the assessee to comply with a “direction” u/s 142 (2A), and accordingly, penalty u/s 272(l)(d) vide order dated 31.07.2021 cannot be sustained.
10 In the backdrop of the aforesaid discussion, we accept the grievance of the assessee as genuine and justified. As such, the penalty of Rs. 40,000/- levied u/s 272(1)(d) of the Act, is hereby deleted.”
6. In the present cases, the AO had never issue a specific notice with points of special audit to the appellant assesse u/s 142(2A) of the Act with the Approval of the PCIT. Therefore, the order of the CIT(A) confirming levy of penalty u/s 271(1)(b) and 272A(1)(b) by observing non-compliance to direction u/s 142(2A) is perverse to the fact on record.
7. On parity of facts, following Coordinate Bench decision in “Navjeevan Charitable Society”, (Supra) we hold the impugned orders are infirm and perverse to facts on record. Accordingly, the impugned orders are set aside and the penalties levied u/s 271(1)(b) and 272A(1)(b) in ITA Nos. 220 to 223/Asr/2022 and ITA Nos. 224 to 226/Asr/2022 respectively are deleted.
8. In the result, the appeals in ITA Nos. 220 to 226/Asr/2022 are allowed.
Order pronounced in the open court on 23.05.2023
