2019 (1) TMI 1568 - AT - Income Tax

Penalty u/s 271(1)(b) - non-compliance to the notice issued u/s 142(1) - HELD THAT - Except in the case of Sunit Madhok assessments in all the other assessee(s) have been framed u/s 153A r.w.s 143(3) which shows that proper representation was there before the assessing officer by the assessees and assessee(s) participated in the assessment proceedings to the satisfaction of Ld. Assessing Officer. In these facts where the assessment orders have not been framed ex-parte u/s 144 but have been framed u/s 143(3) than the penalty levied u/s 271(1)(b) has been held to be unjustified by Coordinate Bench Indore in the case of Pramila Ghodhe vs. DCIT 2017 (3) TMI 1756 - ITAT INDORE Under same set of facts relating to penalty u/s 271(1)(b) similar view of deleting penalty has been taken by Coordinate Bench Indore in another case of Hemant Kumar Soni Ors. Vs. DCIT 2017 (1) TMI 1581 - ITAT INDORE Mr. Sunit Madhok remained non-compliant to the notice u/s 142(1) and and therefore assessments were framed ex-parte u/s 153A r.w.s. 144 - On perusal of the provisions of section 273B which provides that no penalty shall be imposable on the person or the assessee as the case may be for any failure referred to in the said provisions if he proves that there was a reasonable cause for the said failure we find that for the A.Y. 2010-11 to A.Y. 2015-16 penalty should not have been levied on Mr. Sunit Madhok as he was having reasonable cause for not appearing before the assessing officer as the information required to be submitted needed more time than the time granted by the assessing officer. We are thus inclined to hold that penalty of 10, 000/- each for u/s 271(1)(b) for A.Y. 2010-11 to A.Y. 2015-16 needs to be deleted and accordingly set aside the finding of both lower authorities and direct the revenues authorities to delete the penalty of 10, 000/- for A.Y. 2010-11 to A.Y. 2015-16 Penalty u/s 271(1)(b) for A.Y. 2016-17 levied in the case of assessee Mr. Sunit Madhok we are inclined to hold that the penalty of 10, 000/- has rightly been levied u/s 271B as the assessee had continuously defaulted and did not took part in the assessment proceedings. Thus no interference is called for in the finding of the Ld. CIT(A) in the case of assessee Mr. Sunit Madhok for A.Y. 2016-17 and therefore the appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with notice issued under section 142(1).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(b) for Non-Compliance with Section 142(1) Notice:

Facts and Background:
A search under section 132 of the Income Tax Act was conducted on the premises of the assessees on 07.01.2016. Subsequent to the search, notices under section 153A were issued, followed by notices under section 142(1). The assessees did not comply with these notices, prompting the Assessing Officer to initiate penalty proceedings under section 271(1)(b) and levy a penalty of ?10,000 in each case.

Arguments by Assessees:
The assessees argued that they were prevented from complying due to reasonable causes, such as the late provision of seized documents and the short time frame given to respond. They contended that only 3 to 4 days were provided to reply to notices covering 24 pages and 31 issues, making it humanly impossible to comply.

Assessment Proceedings:
It was noted that except for one case (Sunit Madhok), assessments for all other assessees were framed under section 153A read with section 143(3), indicating proper representation and participation in the assessment proceedings. The assessees argued that this subsequent compliance should be considered as a waiver of the earlier default under section 142(1).

Precedents Cited:
The assessees cited several judicial pronouncements supporting their stance, including:
- Pramila Ghodhe vs. DCIT (2017) 49 CCH 0401 Indore Trib
- Hemant Kumar Soni & Ors. vs. DCIT (2017) 49 CCH 0350 Indore Trib
- Magnum Infraprojects Pvt. Ltd vs. ACT (2016) 48 CCH 0137 Mum Trib
- Ramesh Kumar Jain vs. DDIT (International Taxation) (2015) 45 CCH 0073 Mum Trib
- Swarnaben M Khanna & Ors. vs. DCIT (2009) 28 CCH 0773 Ahd Trib

Tribunal's Findings:
The Tribunal observed that in cases where assessments were framed under section 143(3) and not ex-parte under section 144, the earlier non-compliance should be ignored. This view was supported by the precedents cited. The Tribunal noted that in the cases of Pramila Ghodhe and Hemant Kumar Soni, penalties under section 271(1)(b) were deleted under similar circumstances.

Specific Case of Sunit Madhok:
For Sunit Madhok, the Tribunal noted that assessments for A.Y. 2010-11 to A.Y. 2015-16 were completed by accepting the returned income, indicating that the information provided was sufficient. However, for A.Y. 2016-17, an addition was made due to cash found during the search. The Tribunal held that for A.Y. 2010-11 to A.Y. 2015-16, the penalty should be deleted due to reasonable cause for non-compliance. For A.Y. 2016-17, the penalty was upheld as the assessee did not participate in the assessment proceedings.

Conclusion:
The Tribunal allowed the appeals of the assessees in ITANo.361 to 367/Ind/2018, ITANo.345 to 349/Ind/2018, ITANo.353 to 358/Ind/2018, ITANo.368 to 374/Ind/2018, ITANo.375 to 381/Ind/2018, ITANO.389 to 395/Ind/2018, ITANo.400/Ind/2018, and ITANo.338 to 343/Ind/2018, directing the deletion of penalties under section 271(1)(b). The appeal in ITANo.344/Ind/2018 for A.Y. 2016-17 was dismissed, upholding the penalty.

Order Pronouncement:
The order was pronounced in the open Court on 24.01.2019.