The Delhi ITAT, in a recent ruling, held that imposing penalty by quoting wrong section would not itself make the entire proceedings invalid if the assessee had not raised any objection during pre-assessment stage and has co-operated with the proceedings.
The assessee, a Private Limited Company was held as assessee-in-default by the Assessing Officer on ground of non-payment of self-assessment tax. Assessee maintained that the non-payment was due to liquidity crunch. However, the Officer concluded the penalty proceedings and levied penalty under section 140A(3) of the Income Tax Act.
Assessee challenged the above order before the first appellate authority and contended that the penalty should have been levied under section 221. However, the first appellate authority rejected their argument and held that the provisions of section 292B of the Act would cover such inadvertent mistake in quoting the correct section as the appellant had participated in the proceedings without rendering any objection.
While considering the second appeal filed by the assessee, the tribunal noted that before levy of the penalty, the assessee has been communicated exact nature of contravention, for which the assessee was liable, for penalty under section 221 of the Act. it was observed that the Assessing Officer has mentioned all the allegations and charges against the assessee in clear terms in the show cause notice and the assessee has also duly responded to those charges. Furthermore, the assessee in its submission also referred to the relevant section for levy of penalty as Section 140A(3) of the Income Tax Act.
The bench also noticed the Supreme Court decision in the case of Sh. PK Palanisamy, and held that “the proceeding of the Assessing Officer in the impugned order, in substance and effect in conformity with provisions of section 221 of the Act and thus, proceedings in question of the Assessing Officer cannot be held as invalid.”
Read the full text of the Order below.
