Delhi HC: Penalty for TDS Violations and SCN Issues from Previous Name Company Can Be Rectified u/s 292-B

It was mentioned by the Delhi HC that the wrong citing of the name of the taxpayer in the notice issued to it for the default in deduction of tax at source is just a clerical error.

Therefore a division bench of Justices Yashwant Varma and Ravinder Dudeja carried that Show Cause Notice (SCN) along with the penalty order passed under the earlier names of the company could not be rendered void.

“In the light of the fact that there was no change of entity, there being only a change of name of the company, a 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 discovered to be in non-compliance with the TDS provisions.

Therefore the taxpayer has revised its name to “M/s. Adma Solutions Pvt. Ltd.” and the registered office was also moved to another location.

However, a penalty order was passed against M/s. Infovision by JCIT u/s 271C, 272A(2)(c) & 272A(2)(k) of the Act.

The penalty order has been reversed by the Commissioner of Income Tax (Appeals) because SCN is due to the reason that the penalty order was passed under the name of the entity which did not exist much before the start of the penalty proceedings via CIT(A) and hence the order is ineffective within the law.

It is indeed carried by the ITAT that CITA order directing to the revenue to approach the HC.

The revenue laid on a coordinate bench decision in CIT Vs. Jagat Novel Exhibitors P. Ltd. (2013) where it was carried out that misdescription of a party in a reassessment notice can not direct the whole proceedings to be null and void.

Sky Light Hospitality LLP v. Assistant Commissioner of Income-Tax (2018) also mentioned that the Supreme Court carried that the incorrect name provided in the notice was just a clerical error which can be corrected u/s 292-B of the Act.

HC considers that stresses section 292-B of the Act, which furnishes that no notice or assessment or any proceedings can be regarded as not valid just for the cause of any mistake, defect or omission in these notice, assessment or other proceedings.

As the court discovered the action of the revenue to be time-restricted the plea was dismissed.

Revenue after marking that the breach was founded in January 2008, it started the action merely in January 2013; whereas Section 275(1)(c) charges a limitation on passing of the order of penalty. It cited that post lapse of 6 months from the finish of the month where the measure for levying the penalties was started no order levying the penalty can be passed.

“In the present case, survey operation was conducted by the Revenue on 21.01.2008, where upon, 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.”