1982 (6) TMI 184 - AT - Income Tax

Tribunal Upholds Cancellation of Penalties; Fresh Hearing Required on Officer Change

The Tribunal upheld the AAC's decision to cancel the penalties imposed on the assessee under section 271(1)(c) for assessment years 1973-74 to 1976-77. It ... - Issues:- Appeals filed by the assessee against the levy of penalty u/s 271(1)(c)- Challenge to AAC's finding on ITO's order passed without hearing the assesseeAnalysis:1. The appeals were filed by the assessee against the penalty imposed for the assessment years 1973-74 to 1976-77 under section 271(1)(c). The department contested the AAC's decision that the ITO's order, passed without giving the assessee a hearing, should be annulled.2. The assessments were based on the discovery of unexplained cash during a search, leading to a settlement with the department. Penalty proceedings were initiated by the ITO, but delays occurred in the process. The assessee responded to show cause notices and made submissions through a Chartered Accountant. However, the penalty order was issued by a different officer without further hearings, which the AAC found to be a procedural error.3. The AAC ruled that the succeeding ITO should have provided a hearing to the assessee before finalizing the penalty proceedings. The department appealed this decision, arguing that a fresh hearing was unnecessary if written submissions had been received. The department cited various High Court decisions supporting its stance, except for the A.P. High Court's ruling, which the AAC relied upon.4. The department contended that giving a hearing is a procedural requirement, and the AAC lacked the authority to set aside the penalty order. The department emphasized that the appeal proceedings are a continuation of the penalty proceedings, suggesting that any procedural lapses could be rectified without nullifying the order.5. The assessee's representative argued that a personal hearing was necessary due to the change in the officer handling the case. The representative highlighted that the assessee had personally appeared before the ITO and submitted that the A.P. High Court's decision aligned with the specific circumstances of the case.6. The Tribunal upheld the AAC's decision, emphasizing the necessity of a fresh hearing when there is a change in the officer handling the case. The Tribunal agreed with the A.P. High Court's interpretation, stating that the assessee must be given an opportunity for a hearing, especially when unaware of officer changes. The Tribunal rejected the department's arguments regarding the unworkability of this interpretation.7. The Tribunal concluded that the AAC was justified in canceling the penalties, as the ITO's failure to provide a fresh hearing constituted a procedural error. The Tribunal clarified that the AAC's powers in penalty proceedings differ from those in other proceedings, and the specific limitations and requirements must be adhered to without invoking inherent powers. The departmental appeals were ultimately dismissed.