Multiple Penalties Cancelled Under Section 271(1)(b) - Invalid Notice and Lack of Opportunity

The Tribunal held that imposing multiple penalties for a single default under Section 271(1)(b) of the Income Tax Act was not permissible. It found that the notice issued for multiple assessment years lacked validity as it demanded irrelevant information and did not provide a reasonable opportunity of being heard. Consequently, all penalties based on this notice were cancelled, and the appeals were allowed in favor of the assessee.

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Issues Involved:
1. Legality of imposing multiple penalties for a single default under Section 271(1)(b) of the Income Tax Act.
2. Validity of the notice issued under Section 142(1) for multiple assessment years.
3. Adequacy of the opportunity of hearing provided to the assessee.

Issue-wise Detailed Analysis:

1. Legality of Imposing Multiple Penalties for a Single Default:
The primary issue raised by the assessee was that the Commissioner of Income Tax (Appeals) erred in sustaining penalties for seven assessment years based on a single default. The assessee argued that only one penalty should be imposed for one default, as per Section 271(1)(b) of the Income Tax Act. The Appellate Tribunal agreed with this contention, stating that "the seven penalties imposed by passing of seven separate penalty orders on one default are against the provisions of Section 271 (1) (b) of the Income Tax Act." The Tribunal concluded that for the single default of non-compliance with the notice dated 07.12.2015, only one penalty could be imposed.

2. Validity of the Notice Issued Under Section 142(1) for Multiple Assessment Years:
The Tribunal scrutinized the notice issued under Section 142(1) dated 07.12.2015, which required compliance for multiple assessment years (2008-09 to 2013-14) on a single day. It was noted that the notice was also used to impose a penalty for the assessment year 2014-15, which was not mentioned in the notice heading. The Tribunal highlighted the non-application of mind by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals), stating, "the non-application of mind of the AO is glaringly evident." Furthermore, the Tribunal found that the notice demanded information beyond the AO's purview, such as details as on 01.04.2003, which was irrelevant to the assessment years in question.

3. Adequacy of the Opportunity of Hearing Provided to the Assessee:
The Tribunal emphasized the importance of providing a "reasonable opportunity of being heard" as mandated by Section 274(1) of the Income Tax Act. It was observed that the notice issued on 07.12.2015 required compliance by 11.12.2015, giving the assessee only four days to gather and submit voluminous information. The Tribunal stated, "by any stretch of imagination, in such a short period of four days, it is well-nigh impossible for such voluminous documentary information to be gathered, collated, compiled and presented before the AO." Consequently, the Tribunal concluded that the notice did not provide a reasonable opportunity of being heard and was therefore invalid.

Conclusion:
The Tribunal found that the penalties imposed for the alleged non-compliance of the notice under Section 142(1) were not sustainable in law. It held that the single consolidated notice for multiple years was invalid, and as a result, all penalties based on this notice were cancelled. The Tribunal's final order stated, "accordingly, the single consolidated notice issued u/s 142(1) of the Act for the seven years comprising AYs. 2008-09 to 2013-14 is cancelled. As such, all the seven penalties imposed for the alleged non-compliance of the said notice no longer survive and they are also cancelled." The appeals were allowed in favor of the assessee.

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