Two penalty orders u/s 271(1)(b) for same default without issue of show cause quashed by ITAT

Two penalty orders 271(1)(b) for the same default without issue of show cause. ITAT quashed penalty imposed before the issue of show cause notice

ABCAUS Case Law Citation:
ABCAUS 2550 (2018) (10) ITAT

The assessee had filed an appeal before the Tribunal against the order of CIT(A) arising from the penalty order passed U/s 271(1)(b) of the Income Tax Act, 1961 (the Act).

In this case, the assessment was framed U/s 143(3) of the Act. However, the Assessing Officer prior to completion of the assessment passed an order u/s 271(1)(b) of the Act imposing a penalty of Rs. 10,000/- on account of failure of the assessee to comply with the statutory notices issued U/s 142(1) of the Act on various dates prior to a particular date of hearing.

Also, the Assessing Officer in the assessment order mentioned that the show cause U/s 271(1)(b) of the Act is separately issued for non-compliance of all the statutory notices issued u/s 142(1) and in pursuance of the said show cause notice (SCN) passed another order u/s 271(1)(b) of the Act.

Before the Tribunal, the assessee contended that the Assessing Officer passed the first penalty order imposing the penalty without initiation of proceedings u/s 271(1)(b) of the Act or without issuing any show cause notice.

He pointed out that the impugned first penalty order was illegal and without any show case notice or initiation of penalty proceedings.

The Tribunal observed that the Assessing Officer did not issue any show cause notice prior to the first penalty order passed U/s 271(1)(b) of the Act.

The Tribunal found that the Assessing Officer had passed the first penalty order for default up to a specific date. However, after the said date the AO issued three more notices u/s 142(1) and 142(2) of the Act. The Assessing Officer, at the time of passing of assessment order, finally stated at the end of the assessment order that the show cause u/s 271(1)(b) of the Act was separately issued for non-compliance of statutory notices.

It was noted that the second penalty order u/s 271(1)(b) of the Act was passed after completion of the assessment on account of non-compliance of the 13 notices issued U/s 142(1) including the notices for which the first order was already passed. Thus the second penalty order was passed against the consolidated default by the assessee for non-compliance of all the statutory notices.

The Tribunal opined that evidently the first penalty order was passed by the Assessing Officer without initiation of penalty proceedings and without issuing any show cause notice u/s 271(1)(b) of the Act. The only show cause notice was issued by the Assessing Officer was subsequent to the first penalty order.

The Tribunal held that when the Assessing Officer had again passed a second penalty order for non-compliance of the notices including the notice for which first order was passed then the first order passed without initiation of penalty proceedings was illegal and void ab-initio.

Accordingly, it quashed the first order passed u/s 271(1)(b) of the Act.

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