MIDAS EVENTS P. LTD,MUMBAI vs. ADDL CIT (TDS) RG 2, MUMBAI

At the outset, it is noted that the penalties levied by the Assessing Officer under section 271C of the Act for the assessment year 2007-08 and 2008-09 ex-parte. The Assessing Officer, no doubt, has allowed opportunity of hearing by issuing notice but only once. None attended on behalf of the assessee, nor any written submission filed. The Assessing Officer proceeded ex-parte and levied penalty based on material available before him. Similarly, for penalty under section 272A(2)(k) of the Act for both the years i.e. financial year 2007-08 and 2008-09, the Assessing Officer similarly levied the penalty as above. The assessee before CIT(A) pleaded that it has incurred huge losses and also TDS was deducted by the clients, they were outstanding which were not paid by the clients. He pleaded that he has faced critical time due to the following factors:- a. It had incurred an exorbitant amount of Loss of Rs.39.99 Lakhs. b. The Tax Deducted at source by clients amounted to Rs.23.66 Lakhs. c. Receivables outstanding amounted to Rs.49.93 Lakhs. The assessee pleaded reasonable cause before CIT(A) but CIT(A) in all four appeals simply dismissed the appeal by stating that the assessee is 3 TO 3050 /MUM/2014 liable to deduct TDS but he failed to do so. We find from the orders of the lower authorities that the CIT(A) has not gone into reasonable cause adduced by the assessee and not examine the facts relating to reasonable cause. Even Assessing Officer based on an ex-parte order, without providing reasonable opportunity of being heard levied the penalty in both the years under section 271C as well under section 272A(2)(k) of the Act. Going by the facts of the case that assessee was not properly allowed opportunity at the first stage i.e. before the AO and CIT(A) at the second stage has not passed a speaking order on reasonable cause adduced by the assessee. In term of the above, we are of the view that this issue needs reconsideration at the level of the Assessing Officer afresh. Needless to say, the Assessing Officer will allow reasonable opportunity of being heard to the assessee after following due process of law. The assessee will also represent before the Assessing Officer as and when called for. In terms of the above, we set aside the order of the lower authorities and remand the matter back to the file of Assessing Officer for fresh adjudication on these four penalty appeals.

In the result, appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on 18 /05/ 2016.