2015 (9) TMI 1653 - AT - Income Tax

Penalty u/s 271(1)(b) - Assessee's failure to comply with the relevant notices issued by the AO u/s 142(1) - HELD THAT - The order dated 29.11.2012 passed by the CIT(A) speaks that the assessee replied to the notice vide letter dated 7.9.2011 and subsequently, in compliance with the show cause notice u/s 271(1)(b), the assessee also sought the adjournment on the ground of fact that the assessee s representative would be busy in the month of September on account of tax audit. The tax audit and other documental work would be completed. In the said circumstances, the assessee complied with each notice issued by the AO. Subsequently, the assessment was completed vide order dated 26.12.2011 which speaks that the assessee attended the hearing from time to time and the case was also discussed with them. The situation speaks that the assessee filed the details before the AO and thereafter the assessment order dated 26.11.2011 has been finalized. This can be considered as sufficient compliance and the default committed, if any, earlier has been ignored by the AO. Therefore, in the said circumstances, the penalty levied u/s 271(1)(b) is not liable to be leviable - also reasonable cause on account of busy in the month of September on account of tax audit is apparent on record. Penalty deleted - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(b) of the Income Tax Act, 1961.

Analysis:
The appeals were filed against the common order passed by Ld CIT(A)-36, Mumbai concerning the assessment years 2004-05 to 2010-11. The main issue raised was whether the penalty of Rs. 10,000/- u/s 271(1)(b) was correctly imposed by the AO. The appellant argued that there was no failure on their part as they had complied with the notices issued by the AO. They contended that the penalty was unjustified, citing precedents like M/s Cabochon Arts Pvt Ltd V/s DCIT and others. On the other hand, the Department argued that the appellant had not complied with the notices and, therefore, the penalty was rightly imposed and confirmed by the ld.CIT(A).

Upon careful consideration of the contentions and perusal of the record, it was observed that the appellant had responded to the notices and sought adjournments due to genuine reasons such as being pre-occupied with tax audits. The AO had imposed the penalty despite the appellant's compliance with the notices. The assessment order also indicated that the appellant's representative had attended hearings and provided necessary details. The Tribunal found that the penalty was not justifiable as there was sufficient compliance with the notices and a reasonable cause for the delays. The Tribunal relied on legal precedents like M/s Cabochon Arts Pvt Ltd V/s DCIT to support its decision.

In conclusion, the Tribunal held that the penalty levied by the AO was incorrect and against the law. The order of ld. CIT(A) was set aside, and the AO was directed to delete the penalty imposed u/s 271(1)(b) of the Act. Consequently, the appeals of the assessee were allowed, and the decision was pronounced on 23rd Sept, 2015.