2024 (6) TMI 537 - AT - Income Tax

ITAT sets aside Rs. 150,000 penalty under section 271B for lack of mandatory Joint Commissioner approval

Odeon Builders Private Limited Versus ACIT Circle – 19 (1) Delhi

The ITAT Delhi set aside penalty orders totaling Rs. 150,000 imposed under section 271B for failure to submit audit report under section 44AB within the ... Levy of penalty u/s 271B - failure to submit audit report u/s. 44AB on the stipulated date of filing the audit report - HELD THAT:- From the perusal of the penalty order it is evident that it was not mentioned in the penalty order that was passed with the prior approval of the Joint Commissioner. DR is unable to show that the prior approval was obtained before passing the penalty order. As decided in SAGAR DUTTA [2014 (2) TMI 1075 - CALCUTTA HIGH COURT] as it is obligation of the Income Tax Officer to indicate in his order that he passed the order after obtaining requisite approval. Since the order passed by the Income Tax Officer does not contain the requisite recital, it has to be held that no such approval was obtained. The order itself is incompetent. An incompetent order is a nullity and the point as regards nullity can be taken at any stage. It can even be taken at the stage of execution. Even if the orders imposing penalty were not set aside by us, which we propose to do, the order could not have been executed. We have given a thoughtful consideration to the submission of the AR, we are of the considered opinion that the penalty order of Rs. 150000/- was passed without prior approval of the Joint Commissioner which is liable to be set aside. We therefore, set aside both the penalty orders. If the revenue finds that prior approval was obtained from the Joint commissioner in that case revenue will be at liberty to approach the Tribunal. Appeal filed by the assessee is allowed. Issues:1. Validity of penalty under Section 271B of the Income Tax Act2. Compliance with procedural requirements for penalty imposition3. Service of penalty order4. Requirement of prior approval for penalty impositionAnalysis:Issue 1: Validity of penalty under Section 271BThe appellant challenged the penalty of Rs. 1,50,000 imposed under Section 271B of the Income Tax Act, contending that it was initiated and completed without complying with the provisions of the Act. The appellant argued that the penalty order was unjust as there was ambiguity in the show cause notice regarding the default attributable to the appellant. The appellant also claimed that the penalty order was time-barred and required service on the appellant to be valid.Issue 2: Compliance with procedural requirementsThe lower authorities upheld the penalty, stating that the appellant failed to provide a reasonable cause for not submitting the audit report within the due date. The appellant's argument that the penalty order lacked prior approval from the Joint Commissioner was considered valid, citing Section 274 of the Act, which mandates such approval for penalties exceeding a specified amount.Issue 3: Service of penalty orderThe appellant raised concerns about the service of the penalty order, arguing that it was not properly served within the stipulated time limit. However, the tribunal found that the notice was served on the appellant through the verification unit, validating the service of the penalty order.Issue 4: Requirement of prior approvalThe appellant contended that the penalty order did not disclose obtaining prior approval from the Joint Commissioner, as required by law. Citing relevant case law, the tribunal concluded that the penalty order of Rs. 1,50,000 was passed without the necessary prior approval, rendering it invalid and liable to be set aside.In conclusion, the tribunal allowed the appeal filed by the assessee, setting aside the penalty orders due to the absence of prior approval for the penalty imposition. The tribunal emphasized the importance of procedural compliance and the necessity of obtaining prior approval for penalties exceeding the specified threshold.