2014 (2) TMI 1298 - AT - Income Tax

Penalty u/s 271(1)(b) - proof of deliberate defiance on part of the assessee - Held that - Penal action is not warranted as the present case does not fall in the arena of deliberate and willful defiance by not appearing before the AO on the specific date. A perusal of the record shows that the assessee was given about 10 days to give its explanation. It is also seen that the returned income has been accepted by the AO vide order u/s 153A r.w.s 143(3) and not u/s 144 of the Act. Nothing has been brought on record to show that the present case is an attempt of deliberate defiance on part of the assessee. Infact the assessment having been completed u/s 143(3) of the Income Tax Act means that subsequent compliance in the assessment proceedings was considered as good compliance. It is further seen that no reasoning has been given by the CIT(A) as to why the following explanation extracted by him in pages 3 & 4 in para 4 of his order cannot be accepted - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty u/s 271(1)(b) based on non-compliance with statutory notices.

Analysis:
The case involved four appeals by the assessee challenging the penalty u/s 271(1)(b) confirmed by CIT(A) for the Assessment Years 2007-08 to 2010-11. The AO imposed the penalty due to the assessee's failure to comply with notices u/s 142(1) and 271(1)(b) following a search and seizure operation. The CIT(A) upheld the penalty, emphasizing that non-compliance with statutory notices was not justified by reasons like the AR being from Nagpur and not all cases centralized. The assessee contended that penalty imposition without a reasonable opportunity to be heard was unjustified.

The ITAT, after considering the submissions and legal precedents, held that penal action was unwarranted in this case. The ITAT noted that the assessee was given time to explain, and the assessment was completed under section 143(3), indicating good compliance. The ITAT emphasized that no deliberate defiance was evident, and the penalty order lacked reasoning for rejecting the assessee's explanations. The ITAT referred to similar cases where penalties were deleted due to inadequate time for compliance and emphasized the quasi-criminal nature of penalty imposition.

Relying on legal principles and the facts of the case, the ITAT quashed the penalty orders for all years. The ITAT highlighted that penalties should not be imposed unless there is deliberate defiance or contumacious conduct, and authorities must exercise discretion judiciously. The ITAT's decision was based on detailed reasoning on both factual and legal grounds, emphasizing the importance of fair opportunities and compliance with statutory obligations. Ultimately, the ITAT allowed the assessee's appeals, directing the cancellation of the penalty orders in an open court session on 6th February 2014.