Penalty under section 272A(1)(d) deleted as unsigned notices held invalid and inoperative

The ITAT Delhi held that penalty under section 272A(1)(d) for non-compliance of notices during assessment proceedings was not sustainable. The tribunal found that the notices issued to the assessee were unsigned, making them illegal, invalid and inoperative in the eyes of law. Such defective notices cannot vest the issuing authority with jurisdiction to proceed with assessment. The CIT(A) had not disputed the fact that notices lacked digital or manual signatures. The tribunal emphasized that unsigned notices amount to no notice at all, therefore non-compliance cannot be established. The reasoning that the assessee was aware of pending proceedings and suffered no prejudice was held irrelevant and cannot validate an invalid notice. Relying on various HC and ITAT decisions, the tribunal allowed the assessee's appeal and deleted the penalty.

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The core legal issue considered in these appeals is whether penalty under section 272A(1)(d) of the Income Tax Act, 1961 (the Act) can be sustained for noncompliance of notices issued by the Assessing Officer (AO) during assessment proceedings when such notices were not digitally or manually signed, thereby rendering them invalid and non-est in the eyes of law. The appeals arise from penalty orders confirmed by the Commissioner of Income Tax (Appeals) (CIT(A)) relating to assessment year 2021-22, following assessment proceedings initiated under section 153C consequent to search and seizure under section 132 of the Act.

The issues presented and considered include:

• Whether notices issued under the Act that are not digitally or manually signed by the AO are valid and can confer jurisdiction on the AO to proceed with assessment or penalty proceedings.
• Whether noncompliance of such unsigned notices can attract penalty under section 272A(1)(d) of the Act.
• The legal effect of the absence of signature on notices and penalty orders in the context of statutory requirements under section 282A and related provisions.
• The applicability of judicial precedents regarding the validity of unsigned notices and assessment orders.
• Whether the assessee's knowledge of the proceedings or absence of prejudice can validate otherwise invalid notices.
• The jurisdictional competence of the AO to initiate reassessment proceedings under section 153C when the foundational notice is invalid.

Issue-Wise Detailed Analysis:

1. Validity of Unsigned Notices and Jurisdiction of Assessing Officer

Relevant Legal Framework and Precedents: The provisions of section 282A(1) of the Act mandate that notices or other documents issued by any Income Tax Authority must be signed by that authority in accordance with prescribed procedure. The signature requirement is not a mere formality but a mandatory condition precedent for the validity of such notices. Judicial precedents including the High Courts of Bombay, Allahabad, and Calcutta have consistently held that absence of signature-digital or manual-renders the notice invalid and non-est in law, thereby depriving the AO of jurisdiction to proceed.

Key precedents relied upon include:

• Prakash Krishnavtar Bhardwaj v. ITO (Bombay High Court): Held that unsigned notices under section 148 are invalid and proceedings based thereon are without jurisdiction.
• Vikas Gupta & Ors v. UOI (Allahabad High Court): Interpreted section 282A(1) to require mandatory signing of notices and emphasized that satisfaction under section 151 must be recorded under signature before issuance of notice under section 148.
• B.K. Gooyee v. CIT (Calcutta High Court): Held that a notice without signature is invalid and cannot confer jurisdiction.
• Taureg Properties & Security Services Ltd. (ITAT Delhi): Quashed assessment order based on unsigned notice.
• Yeshoda Electricals (ITAT Bangalore): Held that unsigned notices under section 148 are invalid and non-compliance thereof cannot attract penalty.
• ACIT v. Layer Exports (ITAT Mumbai): Emphasized that signature is the "soul" of a document and absence thereof invalidates the document.

Court's Interpretation and Reasoning: The Tribunal noted that the notices issued to the assessee under section 142(1) for compliance during assessment proceedings were not digitally or manually signed by the AO. This deficiency was not disputed by the revenue. The Tribunal held that such unsigned notices are illegal, invalid, and inoperative, and therefore, cannot be construed as valid notices in the eyes of law. Consequently, the AO lacked jurisdiction to proceed with assessment or levy penalty based on these notices.

Further, the Tribunal rejected the CIT(A)'s reasoning that the assessee's knowledge of the proceedings or absence of prejudice could validate the unsigned notices. The Tribunal emphasized that validity of notice is a jurisdictional fact, and absence of signature cannot be cured by waiver or estoppel. It is a mandatory statutory requirement that cannot be overlooked.

Application of Law to Facts: The Tribunal applied the above legal principles to the facts where seven notices issued on various dates were unsigned. The penalty imposed under section 272A(1)(d) for noncompliance of these notices was held to be unsustainable since there was no valid notice to comply with.

Treatment of Competing Arguments: The revenue argued that the assessee was aware of the proceedings and thus no prejudice was caused, and that procedural defects could be cured under section 292B of the Act. The Tribunal rejected these contentions, holding that signing of notices is not a procedural formality but a substantive requirement, and section 292B cannot cure the absence of signature. The Tribunal also distinguished between authentication and signing, noting that mere origin from an official email ID does not substitute for the mandatory signature.

Conclusions: The Tribunal concluded that unsigned notices are invalid and non-est in law, do not confer jurisdiction, and therefore noncompliance cannot attract penalty under section 272A(1)(d). The penalty orders confirmed by CIT(A) were set aside.

2. Legality of Assessment Proceedings Initiated Under Section 153C Based on Invalid Notices

Relevant Legal Framework and Precedents: Section 153C provides for assessment of a person other than the one searched if incriminating material is found during search under section 132. However, the initiation of assessment proceedings requires valid issuance of notices under the Act. The validity of such notices is governed by section 282A and related provisions.

Court's Interpretation and Reasoning: The Tribunal observed that the assessment proceedings under section 153C in the present case were initiated based on notices that were unsigned and therefore invalid. The Tribunal relied on the quantum appellate order of the CIT(A) which had quashed the assessment order as illegal ab initio for want of jurisdiction. Since the foundational notices were invalid, the assessment proceedings themselves were illegal and could not sustain any penalty for noncompliance.

Application of Law to Facts: The Tribunal applied the principle that jurisdiction to initiate assessment must be founded on valid notices. Since the notices were unsigned and invalid, the assessment orders and consequential penalty orders were also invalid.

Treatment of Competing Arguments: The revenue did not dispute the similarity of issues in both appeals and agreed for joint disposal. The Tribunal found no merit in the revenue's contention that the proceedings could continue despite invalid notices.

Conclusions: The Tribunal held that the penalty levied in connection with illegal reassessment proceedings initiated on the basis of unsigned notices is unsustainable and must be quashed.

3. Penalty under Section 272A(1)(d) for Noncompliance of Notices

Relevant Legal Framework and Precedents: Section 272A(1)(d) imposes penalty for failure to comply with notices issued under the Act. However, the validity of the notice is a precondition for imposing penalty. Invalid or non-existent notices cannot form the basis for penalty.

Court's Interpretation and Reasoning: The Tribunal held that since the notices were invalid due to absence of signature, the assessee could not be held liable for noncompliance. The Tribunal emphasized that penalty cannot be imposed for noncompliance of a notice which is not a notice in law.

Application of Law to Facts: The Tribunal found that the penalty of Rs. 70,000/- imposed for noncompliance of seven unsigned notices was not sustainable.

Treatment of Competing Arguments: The CIT(A) had held that since the assessee did not deny receipt of notices and was aware of proceedings, no prejudice was caused and penalty was justified. The Tribunal rejected this, stating that knowledge or absence of prejudice does not validate an invalid notice.

Conclusions: The Tribunal set aside the penalty confirmed by CIT(A) and allowed the appeals.

Significant Holdings:

"...having not disputed the fact of the notices not being digitally/ manually signed there is no iota of doubt at all that the said notices were illegal, invalid and inoperative. They were no notices at all in the eyes of law. Such notices cannot vest the issuing authority with any jurisdiction at all to proceed with the assessment... The penalty therefore levied u/s 272A(1)(d) of the Act, we hold, is not sustainable."

"...an unsigned notice is illegal and invalid. It therefore tantamounts to no notice issued. And there can be no question of noncompliance of such notice at all therefore. The fact of the assessee being aware of the pending proceedings and no prejudice being caused to the assessee is of no consequence at all and in no way gives validity to an invalid notice."

"...signing of an assessment order by the Assessing Officer is a mandatory requirement and not merely a procedural formality. Unless, the order is signed it cannot be said to be complete... The provisions from the Code of Civil Procedure, 1908 (CPC) explaining the requirement of signing the judgments... The signing of an order is thus, not a mere formality, it is a mandatory requirement."

"...the absence of affixation of signature of the A.O, manually or digitally on the notice u/s. 148, dated 27.03.2018... renders the very basis for assumption of jurisdiction by the A.O for framing of assessment... falls to ground."

"...the service of a valid notice, as already noticed, is a condition precedent to the assumption of jurisdiction by the Assessing Officer. The existence of a valid notice is, therefore, a jurisdictional fact."

"...the penalty levied for noncompliance of unsigned notices which are invalid and illegal is totally unwarranted."

Final determinations:

• The notices issued without digital or manual signature are invalid and do not confer jurisdiction on the AO.
• Assessment proceedings initiated on the basis of such invalid notices are illegal and void ab initio.
• Penalty under section 272A(1)(d) for noncompliance of such invalid notices cannot be sustained.
• The penalty orders confirmed by CIT(A) are set aside and appeals are allowed.

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