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of <h1>Court grants writ petitions, sets aside penalties, orders reconsideration with personal hearing. Partial natural justice violation found.</h1> <h3>Divine Chemtec Limited Versus Income Tax Department, National Faceless Assessment Center Delhi,</h3> Divine Chemtec Limited Versus Income Tax Department, National Faceless Assessment Center Delhi, - TMI Issues Involved:1. Validity of the penalty order under Section 271(1)(c) of the Income Tax Act, 1961.2. Application of Explanation 5A to Section 271.3. Violation of principles of natural justice.4. Availability of alternative remedy.Summary:1. Validity of the Penalty Order under Section 271(1)(c):The petitioner challenged the penalty order dated 21.03.2022, proposing to impose a penalty of Rs. 58,72,241/- under Section 271(1)(c) r/w Section 274(2) of the Income Tax Act, 1961. The petitioner argued that the penalty proceedings were initiated based on an inadvertent error in the books of accounts corrected in the revised return filed pursuant to a notice under Section 153A. The revised return was accepted by the Department, and thus, the penalty based on the earlier return filed under Section 139 was not maintainable. The respondents contended that the petitioner had an effective alternative remedy of appeal and that the penalty was rightly imposed for furnishing inaccurate particulars of income.2. Application of Explanation 5A to Section 271:The petitioner argued that Explanation 5A to Section 271 was not applicable as there was no discovery of undisclosed assets or incriminating evidence during the search operations. The petitioner claimed that the excess depreciation was a voluntary rectification of a mistake, not a result of any search findings. The respondents maintained that the penalty was justified as the petitioner had admitted to claiming bogus depreciation during the search operations.3. Violation of Principles of Natural Justice:The petitioner contended that the penalty order was passed without granting an opportunity for a personal hearing, despite a specific request made in the supplemental reply dated 31.05.2021. The court observed that the respondents did not consider the crucial pleas raised in the reply notices and did not accord a personal hearing, amounting to a partial violation of principles of natural justice.4. Availability of Alternative Remedy:The respondents argued that the writ petition was not maintainable due to the availability of an effective alternative remedy of appeal. The court, however, held that the writ petition was maintainable as there was a partial violation of principles of natural justice, citing the precedent set in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai.Conclusion:The court allowed the writ petitions, setting aside the impugned penalty orders dated 16.03.2022 and 21.03.2022. The matters were remitted back to the first respondent with directions to consider the reply notices dated 26.05.2021 and 31.05.2021, afford an opportunity of personal hearing to the petitioner, and pass appropriate orders expeditiously. This was conditional on the petitioner depositing 25% of the penalty amount within six weeks from the date of receipt of the order. No costs were awarded, and pending interlocutory applications were closed.
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