SCN, Penalty Order For TDS Violations Issued In Previous Name Of Company Is Clerical Error, Can Be Rectified U/S 292-B Of Income Tax Act: Delhi HC
The Delhi High Court has made it clear that incorrect mention of assessee's name in a notice issued to it for default in deduction of tax at source is a mere clerical error.
A division bench of Justices Yashwant Varma and Ravinder Dudeja thus held that show cause notice and penalty order passed under the previous name of a company cannot be rendered void.
“In the light of the fact that there was no change of entity, there being only change of name of the company, Show Cause Notice issued and the Penalty Order passed in the name of M/s. Infovision Information Services Pvt. Ltd. is not such a defect which cannot be cured and is therefore not fatal,” it observed.
M/s. Infovision Information Services Pvt. Ltd. was found to be in non-compliance with TDS provisions.
The assessee subsequently changed its name to “M/s. Adma Solutions Pvt. Ltd.” and the registered office was also shifted to a different place.
However, a penalty order was passed against M/s. Infovision by JCIT under Section 271C, 272A(2)(c) & 272A(2)(k) of the Act.
The Commissioner of Income Tax (Appeals) reversed the penalty order on the ground that Show Cause Notice as also the penalty order were passed in the name of an entity which had ceased to exist much prior to the initiation of penalty proceedings by CITA and therefore the order is bad in law.
ITAT also upheld the CITA order, leading the Revenue to approach the High Court.
The Revenue relied upon a Coordinate Bench decision in CIT Vs. Jagat Novel Exhibitors P. Ltd. (2013) where it was held that mis-description of a party in a reassessment notice could not render the entire proceedings to be null and void.
It also cited Sky Light Hospitality LLP v. Assistant Commissioner of Income-Tax (2018) wherein the Supreme Court held that the wrong name given in the notice was merely a clerical error which could be corrected under Section 292-B of the Act.
Agreeing, the High Court emphasized upon Section 292-B of the Act, which provides that no notice or assessment or any proceedings can be deemed to be invalid merely for the reason of any mistake, defect or omission in such notice, assessment or other proceedings.
However, the appeal was dismissed since the Court found Revenue's action to be time-barred.
It noted that though the violations were discovered in January 2008, the Revenue initiated action only in January 2013; whereas Section 275(1)(c) imposes a limitation on passing of penalty order. It states that no order imposing penalty could be passed after expiry of six months from the end of the month in which the action for imposition of penalties was initiated.
“In the present case, survey operation was conducted by the Revenue on 21.01.2008, whereupon, the alleged non-compliance of TDS provisions was first deducted. However, the SCN was issued on 31.01.2013 i.e. after a gap of almost five years.”
Appearance: Sr. Standing Counsel Puneet Rai with Standing Counsel Ashvini Kumar and Rishabh Nangia, Advocate Nikhil Jain for Department; Advocates Salil Kapoor and Mr. Sumit Lalchandani for Respondent
Case title: Commissioner Of Income Tax (Tds)-1 v. M/S Adma Solutions Pvt. Ltd.(Formeri.Y Known As M/S Infovision Information Services Pvt.Ltd.)
Case no.: ITA 272/2019