1. The sum and substance of all the grounds raised by the assessee in this appeal, is to dispute the levy of penalty under Section 271(1)(a) of the Income-tax Act, 1961 ('the Act') in a sum of Rs. 18,962 confirmed by the AAC in the course of first appeal filed by the assessee before him.
2. In order to appreciate the issue, it will be of immense help to state brief backdrop of the facts. The assessment year involved is 1975-76. The income-tax return in this case was required to be filed on 30-6-1975, but the same was filed on 14-3-1978 and the assessment was completed on 25-9-1978. In the assessment order, penalty proceedings for late filing of return under Section 271(1)(a) were initiated and a show-cause notice dated 14-2-1980 was issued by the ITO fixing the case for 21-2-1980 which, according to the revenue, was served on the assessee on 15-2-1980. The penalty order by the ITO was, however, passed on 25-3-1981 levying a penalty of Rs. 24,272 on the assessee under Section 271(1)(a) for late filing of the return.
3. When the said penalty came to be disputed before the AAC, he, for the reasons given by him in his order, confirmed the penalty in a sum of Rs. 18,962.
4. It is this action of the AAC which is disputed by the assessee before us. The learned counsel for the assessee, Shri M.L. Chopra, after stating the facts, briefly placed above, vehemently argued that the assessee was a partnership firm constituting of Mrs. Narinder Kaur and Mr. Harmanjit Singh. The said firm came to be dissolved with effect from 11-9-1974 and even the tenanted premises in which the firm was running its business, was dehired from 31-12-1978. He vehemently argued that it was because of serious differences amongst the partners that the return could not be filed in time and since Harmanjit Singh was looking after the affairs of the firm, it was he who was to file the return which he did not do in time. He also submitted that the firm in question was dissolved on 11-9-1974 and a show-cause notice dated 14-2-1980, alleged to have been served on the assessee, was actually never served. He also, with all the vehemence at his command, made his last submission that even when the date for penalty was fixed for 20-2-1980, it was after lapse of much time that the ITO levied the penalty, i.e., on 25-3-1981 and he submitted that to this effect an affidavit was placed before the AAC which, according to him, in the face of not having been disputed, should have been relied upon in respect of the contention of the assessee. The learned departmental representative, Shri Durgesh Shankar, on the other hand, beside relying on the order of the AAC, submitted that there was nothing to support the contention placed by the learned counsel for the assessee. There was only an affidavit placed before the AAC, which he disbelieved and rightly rejected the same and confirmed the penalty.
5. After taking into consideration, the rival submissions and looking to the facts on record, we hereby cancel the levy of penalty. The affidavit given by one of the partners Mrs. Narinder Kaur, which is placed on the assessee's compilation at page 3, reads as under : That I became a partner in the firm M/s. Textile Agencies with Mr.
Harmanjit Singh, s/o Shri Pal Singh, w.e.f. 1-4-1972 and a regular partnership deed was executed on the same date, viz., 1-4-1972.
2. That the partnership business was of cloth merchants and commission agents. The entire investment in the business was made by me.
4. That due to serious difference between me and Harmanjit Singh, the firm was dissolved with effect from 11-9-1974 vide deed of dissolution dated 12-9-1974.
5. That the firm was dissolved due to differences between the partners and as a result thereof Harmanjit Singh, who was to file the return, did not do so in time.
6. That account books for the period relevant to the assessment year 1975-76 were written and maintained by Harmanjit Singh but since he was not a financing partner, he did not take any interest in closing the account books or filing the return in time.
Beside this, there is a certificate to the effect placed by the assessee before the AAC regarding dehiring of the said premises by the assessee-firm which belonged to Amar Nath, which is placed on the assessee's compilation at page 4 and which reads as under : This is to certify that I, Amar Nath, am the owner of shop No. 18 situated at 895, Kucha Kabil Attar, Chandni Chowk, Delhi and Mrs.
Narinder Kaur, w/o Mr. Jagjit Singh, was my tenant at the rate of Rs. 50 per month up to 31-12-1978.
From the above two documents, it is apparent that the firm in question got dissolved on 11-9-1974 and the assessee had dehired the premises in which the business was conducted, some time in December 1978. Notice dated 14-2-1980, fixing the date of hearing for 20-2-1980, is alleged to have been served on the assessee on 15-2-1980, but to that effect no evidence was placed before us by the revenue confirming service of the said notice. The submission of the learned departmental representative that the assessee does not refuse having received the assessment order which also bore initiation of penalty proceedings under Section 271(1)(a), cannot be damaging to the contention of the assessee, because a show-cause notice for grant of opportunity is a 'must' in a case of levy of penalty under Section 271(1)(a) and that is trite law by now. This also cannot be ignored that the penalty order was passed as late as on 25-3-1981 and this is not the case of the revenue that any other notice was served between 20-2-1980 to 25-3-1981. Reliance of the assessee on the Calcutta High Court decision in the case of Calcutta Tanneries (1944) Ltd. v. CIT  40 ITR 178, which is for the proposition that "The successor officer had no authority to pass an order of penalty without giving the assessee a further opportunity of advancing arguments before him", on the Punjab and Haryana High Court decision in the case of Satprakash Ram Naranjan v. CIT  71 ITR 646 in respect of identical proposition and also in the case of Ram Saran Das Kapur v. CIT  77 ITR 298, in which it was held that "A personal hearing can have some meaning only if it is given by the very person who has ultimately to decide the matter. Oral hearing by one officer cannot be of any advantage to his successor in deciding a case" and another case of the Andhra Pradesh High Court being Anantha Nuganna Chetty v. CIT  78 ITR 743 on identical issue, support the contention of the assessee. Under the circumstances, penalty levied on 25-3-1981 after a lapse of over a year and no fresh opportunity having been granted for the said date and there being no proof that even notice dated 14-2-1980 was served on the assessee on 15-2-1980, penalty cannot be sustained.
6. Before we part with the matter, we may meet the contention raised by the learned departmental representative that it was on the last given address of the assessee-firm that notice was served on but there being no dispute about the fact that the notice in question was not served by affixture, but was sent by post and such service has to be on the assessee or any authorised person, even on the last known address, the same having not been proved, penalty under dispute deserves to be cancelled. We, therefore, cancel the penalty.