Penalty – Mistake in notice not to affect validity – Scope of section 292B – Mistake in specifying assessment year for which penalty was levied – Mistake could not be corrected u/s 292B

Penalty – Mistake in notice not to affect validity – Scope of section 292B – Mistake in specifying assessment year for which penalty was levied – Mistake could not be corrected u/s 292B

The assessee is a company and for the A.Y. 2008-09 it had paid the tax on the assessed income. However, the A.O. passed an order dated 9th February, 2009 and levied a penalty of Rs. 50,00,000 u/s 221 for the A.Y. 2008-09. The assessee pleaded that it appeared that the A.O. had considered the facts of the case for the A.Y. 2007-08 for levying the penalty for the A.Y. 2008-09 and had passed an order u/s 221 to raise the demand of Rs. 50,00,000.

Both the Commissioner (Appeals) and the Tribunal dismissed the appeals filed by the assessee.

The Karnataka High Court allowed the appeal filed by the assessee and held as under:

‘i) From a close scrutiny of section 292B it is evident that no return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. In other words, any clerical or typographical error or omission in the return of income, assessment, notice, summons or other proceeding shall not invalidate the proceedings. When there is no confusion or prejudice caused due to non-observance of technical formalities, the proceedings cannot be invalidated and therefore, a defective notice to an assessee u/s 292B of the Act is not invalid.

ii) The order of penalty referred to the A.Y. 2008-09. The order by which the penalty was levied by the A.O. had been affirmed by the Commissioner (Appeals) and similarly, the Tribunal had held that the penalty had been levied in respect of the A.Y. 2008-09. From a perusal of the memorandum of appeal it was evident that the assessee had paid tax in respect of the A.Y. 2008-09. The assessee had committed a default in respect of the A.Y. 2007-08 and did not pay the tax on account of financial hardship. However, the authorities under the Act had taken into account the facts in respect of the A.Y. 2007-08 and had held the assessee to be in default in respect of the A.Y. 2008-09 and had levied the penalty u/s 221 in respect of the A.Y. 2008-09.

iii) The mistake could not be condoned u/s 292B under which only clerical error or accidental omissions can be protected. The order of penalty was not valid.’