2019 (4) TMI 1979 - AT - Income Tax

Penalty u/s 221(1) - AO found that assessee has not remitted the tax outstanding - AR submitted that AO was not explained about the break-up of the dues can the penalty be levied on total outstanding without restricting it to only tax dues - As argued no proper/reasonable opportunity to assessee - HELD THAT - AO issued several notices but assessee has not availed the opportunity to explain the sufficient reasons for such pending taxes. AO levied penalty u/s 221(1) of the Act. Even before the CIT(A) assessee failed to make submission even though CIT(A) has given several opportunities. Penalty cannot be levied without giving proper/reasonable opportunity to assessee. In this regard assessee never made any representation before any authority even though tax authorities were considerate and given several opportunities to the assessee. Since this issue is relating to penalty we deem it fit to give one more opportunity to assessee. Therefore we direct the AO to give a reasonable opportunity of being heard to the assessee and the assessee also directed to submit relevant information before the AO regarding the sufficient reasons as to why penalty u/s 221(1) cannot be levied. AO is directed to complete the proceedings as per law. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against penalty levied under section 221(1) of the Income Tax Act without proper opportunity to explain reasons for outstanding taxes.

Analysis:
The judgment pertains to multiple appeals by the same assessee against the penalty levied by the Assessing Officer (AO) under section 221(1) of the Income Tax Act. The AO observed a consolidated outstanding demand for multiple assessment years and issued notices to the assessee to show cause as to why the penalty should not be levied. The AO concluded that the assessee failed to provide any reasonable cause for not paying the outstanding demand and levied a penalty of 10% for each year. The assessee, aggrieved by this decision, appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], but failed to substantiate their case despite several opportunities given by the CIT(A). Consequently, the CIT(A) confirmed the penalty imposed by the AO.

Upon further appeal to the Appellate Tribunal, the assessee raised various grounds challenging the penalty levied. The Tribunal noted that the assessee had not remitted the outstanding tax despite multiple notices and opportunities to explain the reasons for non-payment. The assessee argued that the penalty should be restricted to only tax dues and not include other amounts outstanding. The Tribunal, after considering the submissions, opined that the penalty cannot be levied without affording the assessee a proper opportunity to present their case. Therefore, the Tribunal directed the AO to provide a reasonable opportunity to the assessee to explain the reasons for not paying the outstanding demand. The assessee was instructed to submit relevant information to support their case, and the AO was directed to complete the proceedings as per law.

Ultimately, the Tribunal allowed the grounds raised by the assessee for statistical purposes in all the appeals under consideration. The appeals were treated as allowed, emphasizing the importance of providing a fair opportunity for the assessee to present their case before imposing penalties under the Income Tax Act.