2016 (1) TMI 1209 - AT - Income Tax

Levy of penalty u/s 271(1)(b) - assessee was subjected to search u/s 132, consequently, the assessment proceedings u/s 153A was initiated - A.O. held that the assessee failed to appear on the date of hearing and also failed to seek adjournment - Held that - We find force in the arguments of the assessee for the reason that the A.O. has given insufficient time to gather voluminous information for a period of seven years. We further observed that the assessment was finally completed u/s 143(3) r.w.s. 153A of the Act, after fully supplied with all material facts required for assessment proceedings. Hence, we are of the view that the initial failure becomes technical, which does not warrant levy of penalty u/s 271(1)(b) of the Act. Also a similar issue has been considered by this bench, in assessee s husband case 2016 (10) TMI 552 - ITAT VISAKHAPATNAM wherein the coordinate bench of this Tribunal, under similar set of facts has held that the explanations offered by the assessee that she could not attend as on the date of hearing because of insufficient time given by the A.O. to collect voluminous information appears to be reasonable and bonafide - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s 271(1)(b) r.w.s. 274 of the Income Tax Act, 1961 for assessment years 2012-13 & 2013-14 based on non-compliance with statutory notices u/s 142(1) & 143(2) of the Act.

Analysis:
The appeals were filed against the order confirming the penalty. The assessee was subjected to search u/s 132 of the Act due to a search and seizure action in another case. The A.O. initiated penalty proceedings as the assessee failed to appear or furnish information in response to notices u/s 142(1) & 143(2) of the Act. The A.O. held that the assessee did not comply with the notices and levied penalties for each such failure for the relevant assessment years.

The assessee contended that non-attendance was unintentional due to the time constraints in gathering voluminous information requested by the A.O. The CIT(A) held that mere non-compliance without persistent intention does not warrant penalty. The CIT(A) directed the deletion of penalties where the A.O. allowed 8 days for appearance but upheld penalties where 26 days were given. The assessee appealed against the partial penalty upheld by the CIT(A).

The ITAT found that the A.O. gave insufficient time to gather the required information, leading to the technical non-compliance. Referring to a similar case, the ITAT held that the explanations offered by the assessee were reasonable and bonafide. Consequently, the ITAT directed the A.O. to delete the penalties for the assessment years in question based on the bonafide reasons for non-appearance.

The ITAT emphasized that the A.O. should consider the reasons for non-appearance in light of the time constraints and voluminous information requested. Relying on the precedent and the bonafide nature of the explanations, the ITAT allowed the appeals and directed the deletion of penalties for the relevant assessment years.

In conclusion, the ITAT allowed the appeals, emphasizing the bonafide reasons for non-appearance due to time constraints in gathering voluminous information. The ITAT directed the A.O. to delete the penalties levied under section 271(1)(b) of the Income Tax Act for the assessment years 2012-13 & 2013-14.