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2017 (2) TMI 1251 - AT - Income TaxPenalty u/s 271(1)(b) - unexplained bank account - Held that - There was compliance by the assessee to each and every letter or notice issued by the A.O. Thus it cannot be said that the assessee did not comply with the notices/letters. Therefore, the penalty levied by the AO u/s 271(1)(b) was not justified. In the instant case the Ld.CIT(A) confirmed the penalty for the reason that the assessee did not give the consent form for obtaining the bank statement. In our opinion, when nothing was brought on record to substantiate that the alleged bank account actually belonged to the assessee, there was no possibility of furnishing the consent form, particularly when the assessee time and again denied that the alleged bank account belonged to him. Therefore, we are of the confirmed view that the sustenance of penalty u/s 271(1)(b) by the Ld.CIT(A) was not justified, particularly when the assessee complied with the notice/letters issued by the A.O. and it was not possible for him to give the consent form for obtaining the bank statement, as the same did not belong to him. We, therefore, considering the totality of the facts, delete the penalty u/s 271(1)(b) of the Act levied by the AO and sustained by the Ld.CIT(A). - Decided in favour of assessee.
Issues Involved:
1. Legality of the penalty under section 271(1)(b) for non-compliance with notice under section 142(1) of the Income Tax Act, 1961. 2. Validity of the requirement to furnish a consent form for a bank account allegedly not belonging to the assessee. 3. Applicability of section 273B for reasonable cause in non-compliance. 4. Timing and procedural correctness of imposing the penalty before the completion of the assessment order under section 153A. Issue-wise Detailed Analysis: 1. Legality of the Penalty under Section 271(1)(b): The assessee was penalized ?10,000 under section 271(1)(b) for alleged non-compliance with a notice dated 12.07.2013 issued under section 142(1). The Assessing Officer (A.O.) sought information regarding an undisclosed HSBC Bank account. The assessee responded, denying ownership of the account and thus could not provide the requested documents. The A.O. considered this denial as non-compliance and imposed the penalty. The assessee argued that replying to the notice constituted compliance, and the penalty was unjustified. 2. Validity of the Requirement to Furnish a Consent Form: The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, reasoning that if the account did not belong to the assessee, there was no harm in providing the consent form to allow the A.O. to verify the account details with HSBC. The CIT(A) argued that not furnishing the consent form hindered the investigation and created doubt about the assessee's claims. The CIT(A) held that the A.O. was within his rights to request the consent form under section 142(1)(iii). 3. Applicability of Section 273B for Reasonable Cause: The assessee contended that there was reasonable cause for not furnishing the consent form since the bank account did not belong to him, invoking section 273B, which provides that no penalty shall be imposed if reasonable cause is proven. The CIT(A) rejected this argument, stating that the assessee should have provided the consent form to facilitate the investigation, and failure to do so constituted non-compliance. 4. Timing and Procedural Correctness of Imposing the Penalty: The assessee argued that the penalty was imposed before the completion of the assessment order under section 153A, and the A.O. did not record mandatory satisfaction in the body of the assessment order itself. The assessee cited case laws emphasizing that penalty proceedings should be initiated during the assessment and satisfaction must be recorded in the assessment order. The CIT(A) found no merit in this argument, stating that the penalty was for specific non-compliance and did not require the assessment to be passed ex-parte under section 144. Tribunal's Decision: The Tribunal observed that the assessee had complied with the notices by denying ownership of the bank account and providing timely responses. It found that the A.O. did not substantiate the claim that the bank account belonged to the assessee and that the assessee could not provide a consent form for an account he did not own. The Tribunal concluded that the penalty under section 271(1)(b) was not justified, as the assessee had complied with the notices to the best of his ability. Consequently, the Tribunal deleted the penalty and allowed the appeals. Conclusion: The Tribunal's detailed analysis led to the conclusion that the penalty under section 271(1)(b) was unjustified due to the assessee's compliance with the notices and the lack of evidence proving ownership of the alleged bank account. The appeals were allowed, and the penalties were deleted.
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