2009 (12) TMI 669 - AT - Income Tax

Penalty u/s 271(1)(b) - violation of notice u/s 142(1) - statutory notice u/s 142(1) was issued to the four assessees for assessment year 2006-07 only and not for any other assessment years - HELD THAT - Before levying penalty under section 271(1)( b ), there must be specific notice to the assessee for specific assessment year with specific requirements to be complied with. The compliance must have relevance to the assessment year in question and it must have apparent nexus with the assessment for that assessment year to be framed. General information sought may not be relevant for any particular assessment year. In addition, adequate time should be given to the assessee for making compliance. The notices were issued on 14-8-2007 in some cases and compliance were required to be made by 24-8-2007. Thereafter the Assessing Officer proceeded to initiate the penalty proceedings. In our considered view, it is against the principles of natural justice as no reasonable opportunity is given to them for making compliance of the information sought. The statutory provision for levy of penalty is not for mere technical non-compliance but for actual or habitual defaulters. On the face of present facts where the Assessing Officer has hastily proceeded to initiate penalty proceedings in all the cases, it is difficult to infer that these assessees were intending to make non-compliance, information sought by the Assessing Officer is very detailed and requires assistance from professionals like Advocate or Chartered Accountant. An affidavit has been filed from Shri Kaushal M. Khanna before the ld. CIT(A), i.e., erstwhile Chartered Accountant who was handling his tax matters, has left all these assessees and the family is in search of new counsel for making compliance made by the Income-tax Department. It shows that these assessees had really intended to comply with the notices and, therefore, it should not be inferred that there was a default which could invite penalty under section 271(1)( b ). As decided in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust 2007 (8) TMI 386 - ITAT DELHI-G has held that if assessment order is passed u/s 143(3), and not u/s 144 then non-compliance is deemed to have been waived. Hence, we hold that neither the AO nor the Learned CIT (A) has made out a case for sustaining the penalties - Assessee appeal allowed.

Summary

Issues:
Levy of penalties under section 271(1)(b) of the Income-tax Act, 1961 for assessment years 2000-01 to 2006-07 based on non-compliance of notices under section 142(1).

Analysis:
The Appellate Tribunal ITAT Ahmedabad dealt with appeals against penalties imposed under section 271(1)(b) of the Income-tax Act, 1961 for various assessment years. The penalties were confirmed by the Commissioner of Income-tax (Appeals) based on non-compliance with notices under section 142(1) by the assessees. The Tribunal noted that a search and seizure action was conducted, and notices were issued to furnish details of undisclosed income. The assessees failed to comply with the notices, leading to the imposition of penalties of Rs. 10,000 for each assessment year from 2000-01 to 2006-07.

The Commissioner of Income-tax (Appeals) upheld the penalties, presuming that notices were duly issued to the assessees. However, during the appeal, it was argued that there were defects in the issuance of notices, lack of clarity in requirements, and inadequate time given for compliance. The Tribunal observed that specific notices with relevant requirements for each assessment year must be issued, and compliance should have a direct nexus with the assessment to be framed. It emphasized the importance of providing adequate time for compliance before initiating penalty proceedings.

The Tribunal considered the circumstances, including the detailed nature of information sought, the departure of the previous tax advisor, and the efforts to find new counsel for compliance. It referred to a prior decision where non-compliance was deemed waived if the assessment order was passed under a specific section. Ultimately, the Tribunal concluded that the penalties were not justified as there was no evidence of intentional non-compliance or habitual default. Therefore, the penalties for all assessment years and assessees were canceled, holding that the authorities failed to establish a case for sustaining the penalties.

In conclusion, the appeals filed by the assessees were allowed, and the penalties under section 271(1)(b) for non-compliance with notices under section 142(1) were canceled for all the assessment years involved.