Co-noticee penalty under Rule 26 set aside after main dispute settled under SVLDRS-2019.

Penalty on a co-noticee under Rule 26 was challenged on the basis that the main noticee's dispute had been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Faced with conflicting authorities on whether such settlement extinguishes co-noticee penalty, the Division Bench view favourable to the assessee was applied over contrary Single Member Bench decisions. On that basis, the penalty could not be sustained and was set aside.

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Issues: Whether penalty imposed on a co-noticee under Rule 26 was liable to be set aside when the main noticee's dispute had been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Analysis: The issue was decided in the light of conflicting decisions on waiver of penalty for co-noticees after settlement of the main case under SVLDRS-2019. It was held that the Division Bench view, which was in favour of the assessee, would prevail over contrary Single Member Bench decisions. On that basis, the penalty imposed on the appellant could not be sustained.

Conclusion: The penalty under Rule 26 was set aside and the appeal was allowed in favour of the appellant.

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