2014 (1) TMI 797 - AT - Income Tax

Penalty u/s 271(1)(b) - Held that - There was service of notice u/s 142(1) through affixture of notice at the residential premises of the assessee - The Department could not serve the notice through speed post as the same were returned by the Postal Authority with the remarks Left - This clearly indicates that at the relevant time the assessee was not residing at the said address - This is not a fit case for levying penalty u/s 271(1)(b) of the Income-tax Act, 1961 - Therefore, penalty of Rs.10,000/- levied by the Assessing Officer u/s 271(1)(b) of the Income-tax is hereby cancelled Decided in favour of assessee.

Summary

Issues: Penalty under section 271(1)(b) of the Income-tax Act for non-compliance with notice u/s 142(1).

Detailed Analysis:

1. Facts and Background: The appeal was against the penalty of Rs.10,000 imposed by the Assessing Officer under section 271(1)(b) of the Income-tax Act. The assessee, an individual, did not file a return for the relevant assessment year. Notices were sent to the assessee's residential address, but the assessee did not respond or attend any proceedings.

2. Arguments by the Assessee: The authorized representative of the assessee argued that the notices were sent only to the residential premises, and the whereabouts of the assessee were unknown. The AR highlighted that due to circumstances beyond the assessee's control, he was not aware of the proceedings and could not comply with the notices. It was contended that non-compliance was due to non-receipt of information, constituting a reasonable cause under Section 273B of the Income-tax Act.

3. Revenue's Position: The Revenue, represented by Dr. J.B. Jhaveri, supported the penalty upheld by the CIT(A), emphasizing that the notice u/s 142(1) was duly served through affixture, and it was the assessee's obligation to comply.

4. Tribunal's Decision: After considering the arguments, the Tribunal noted that while the notice was technically served through affixture, the returned speed post notices indicated the assessee was not residing at the address. Given the circumstances and the assessee's lack of awareness, the Tribunal concluded that it was not appropriate to levy the penalty under section 271(1)(b). Consequently, the penalty of Rs.10,000 imposed by the Assessing Officer was canceled, and the appeal of the assessee was allowed.

In conclusion, the Tribunal found that the peculiar facts of the case, including the unknown whereabouts of the assessee and the returned speed post notices, justified the non-compliance and warranted the cancellation of the penalty.