2015 (3) TMI 232 - AT - Income Tax

Penalty u/s 271(1)(b) - Non appearance in assessment proceedings - Non service of notice - Held that - One of the notices was returned by the postal authorities for want of delivery, the other notice was delivered under the acknowledgement which does not bear the seal or name of the recipient. Further, the assessee explained before the Assessing Officer in the penalty proceedings that the notice allegedly served at the address 319, Marathon Max, Mulund (West), Mumbai was not received by the assessee because the assessee hired the said premises for a short period and subsequently cancelled the lease agreement. The notices sent at the Bandra address of the assessee were not at all served to anybody and therefore there was no service on the assessee. - reasons explained by the assessee for non appearance before the Assessing Officer in the assessment proceedings as reasonable cause as none of the notices were properly served to the assessee so as to cause the appearance before the Assessing Officer in the assessment proceedings. Accordingly, in the facts and circumstances of the case and in the interest of justice, we are of the view that the case of the assessee falls under the reasonable cause as contemplated under section 273B of the Income Tax Act and consequently penalty levied under section 271(1)(b) is deleted. - Decided in favour of assesse.

Summary

Issues: Appeal against penalty order under section 271(1)(b) for assessment year 2004-05.

Analysis:
1. The appeal was against the penalty order under section 271(1)(b) for the assessment year 2004-05. The assessee challenged the penalty of &8377; 40,000 levied by the Assessing Officer, which was confirmed by the CIT(A). The assessee raised various grounds, including lack of proper notice service and reasonable cause for non-appearance.

2. The Assessing Officer initiated penalty proceedings under section 271(1)(b) after issuing notices under section 143(2) and 142(1) of the Income Tax Act. The assessment was completed under section 144 due to non-attendance by the assessee. The penalty was imposed for alleged defaults in responding to the notices. The assessee contended that notices were not effectively served, leading to non-appearance.

3. The assessee argued that out of the four notices issued, three were not served, and the fourth might have been served to a security guard. The assessee claimed reasonable cause for non-appearance, citing successful compliance in other assessment years. The Tribunal had previously accepted similar reasons as reasonable cause in quantum proceedings for other years.

4. The Department maintained that the defaults were valid as the assessee did not attend despite notice. The Assessing Officer and the CIT(A) upheld the penalty, citing non-attendance as evidence of default.

5. The Tribunal reviewed the evidence, including postal remarks on the notices. It noted discrepancies in service, with some notices not reaching the assessee's address. The Tribunal referenced the quantum proceedings where the Tribunal accepted the explanation as reasonable cause for non-appearance. Consequently, the Tribunal found the assessee's reasons justified and deleted the penalty under section 271(1)(b) for the assessment year 2004-05.

6. The Tribunal concluded that the assessee had a reasonable cause for non-appearance due to ineffective notice service, aligning with section 273B of the Income Tax Act. Therefore, in the interest of justice, the penalty was deemed unjustified and deleted. The appeal of the assessee was allowed, overturning the penalty order.

This detailed analysis covers the issues raised in the appeal against the penalty order under section 271(1)(b) for the assessment year 2004-05, highlighting the arguments presented by both parties and the Tribunal's decision based on the facts and legal provisions.