2016 (5) TMI 1562 - AT - Income Tax

Penalty u/s 271(1)(b) - assessee has not made proper compliance with the statutory notices - non maintaining books of accounts - assessee submitted that the Assessing Officer wanted the assessee to produce the books of accounts for computing the total income but for maintenance of books of accounts by an individual or any person not having the income from profession as specified in sub-section (1) of section 44AA or carrying on business or profession having income - HELD THAT - No penalty can be imposed on the person or the assessee, as the case may be, for failure referred to in the above section if he proves that there was reasonable cause for such failure. Now in the instant case, the assessee has complied with all the notices and he has raised a legal objection that the assessee is not required to maintain books of accounts and if at all he is required to maintain the books of accounts that too for six years. Moreover, the assessee has filed detailed affidavit and also demanded the reasons recorded for reopening the assessment order. Therefore, this contention of the assessee can be said to be a reasonable cause for noncompliance with the notices issued by the Assessing Officer. As assessee has filed the reply and raised the legal objection. The legal objection is tenable or not is not a question before me but in my opinion, the assessee has complied with the notices issued under subsection (1) of section 142 of the Act and moreover the assessee has also raised the legal objection that the assessee is not required to maintain the books of accounts as the assessee is not carrying on any profession or business. As assessee has a reasonable cause for not complying with the notices. Moreover, the Assessing Officer has also stated that proper compliance is not made but the assessee has complied with the notices. Therefore, as per section 273 of the Act, the assessee has a reasonable cause for non-compliance with the notices to the satisfaction of the Assessing Officer - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(b) of the Income Tax Act.
2. Requirement to maintain books of accounts under section 44AA of the Income Tax Act.
3. Validity of notice under section 142(1) for multiple assessment years.
4. Reasonable cause for non-compliance under section 273B of the Income Tax Act.

Detailed Analysis:

Issue 1: Imposition of Penalty under Section 271(1)(b)
The primary issue in these appeals is the imposition of penalty under section 271(1)(b) of the Income Tax Act for failure to comply with statutory notices. The Assessing Officer (AO) levied a penalty of ?10,000 for each of the assessment years on the grounds that the assessee did not make proper compliance with the statutory notices. The AO argued that the assessee had not only made factually incorrect claims but also raised irrelevant objections, which led to the imposition of penalties.

Issue 2: Requirement to Maintain Books of Accounts under Section 44AA
The learned counsel for the assessee raised a legal objection stating that the assessee, being an individual retired from government service with income primarily from salary, pension, and interest, was not required to maintain books of accounts under section 44AA of the Act. The counsel argued that the assessee was neither engaged in any profession specified under section 44AA(1) nor in any business or profession as specified under section 44AA(2). Therefore, the assessee was not obligated to maintain books of accounts or other records for the assessment years under consideration.

Issue 3: Validity of Notice under Section 142(1) for Multiple Assessment Years
The counsel for the assessee also contended that a single notice under section 142(1) for 12 assessment years was issued, which is ab initio void and bad in law. The AO had issued a notice on 19.7.2013 for multiple assessment years, which the counsel argued was not permissible under the law. The AO had demanded the production of books of accounts for a period beyond the statutory requirement of six years, making the notice invalid.

Issue 4: Reasonable Cause for Non-Compliance under Section 273B
The Tribunal examined whether there was a reasonable cause for the assessee's non-compliance with the statutory notices. It was noted that the assessee had complied with the notices by raising a legal objection regarding the requirement to maintain books of accounts. The assessee also filed a detailed affidavit and demanded the reasons recorded for reopening the assessment. The Tribunal found that the legal objection raised by the assessee constituted a reasonable cause for non-compliance under section 273B of the Act. Consequently, the Tribunal held that no penalty could be imposed as the assessee had a reasonable cause for the said failure.

Conclusion:
The Tribunal concluded that the assessee was not required to maintain books of accounts as per section 44AA of the Act, and the notice issued under section 142(1) for multiple assessment years was invalid. The Tribunal also determined that the assessee had shown a reasonable cause for non-compliance with the statutory notices, thus deleting the penalties imposed under section 271(1)(b). The order governs all related appeals, and the penalties levied in all these appeals stand canceled. All appeals of the assessees were allowed.