2014 (8) TMI 1229 - HC - Income Tax

Penalty u/s 271(1)(b) - HELD THAT - Assessee admits that the summon was received personally by the assessee, which was handed over to the Chartered Accountant but the Chartered Accountant could not appear due to his personal illness. This fact was brought to the notice of the income tax authorities. We are of the view that for the fault of the Chartered Accountant, the assessee cannot be punished as per the ratio laid down in the case of Commissioner of Income Tax Vs. S. Dhanabal 2008 (8) TMI 15 - DELHI HIGH COURT . We cancel the levy of penalty order. All the impugned orders are hereby set aside. The assessee will get the relief accordingly.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal for assessment year 2003-04 based on penalty provisions under section 271(1)(b) of the Income Tax Act.

Analysis:
The appeal challenged the order passed by the Income Tax Appellate Tribunal for the assessment year 2003-04. The substantial questions of law admitted by the coordinate Bench included the interpretation of penalty provisions under section 271(1)(b) of the Income Tax Act. The first question raised was whether the use of "satisfied" and "may" in the penalty provisions required a quasi-judicial application of mind based on subjective considerations with objectivity regarding the evidence for penalty imposition. The second question addressed whether the un-controverted affidavit of the counsel, without examination or documentary evidence, could justify the levy of penalty. The third question focused on whether the appellant's bona-fide belief regarding the delivery of notice to the counsel's office justified non-attendance at proceedings and penalty imposition.

The appellant's counsel and the department's counsel were heard, and it was revealed that the summons were personally served on the assessee, who then handed them over to the Chartered Accountant. However, the Chartered Accountant could not appear due to personal illness, which was communicated to the income tax authorities. Considering these circumstances, the court held that the fault of the Chartered Accountant should not result in the punishment of the assessee, citing precedent from the case of Commissioner of Income Tax Vs. S. Dhanabal. Consequently, the court canceled the penalty order, setting aside all impugned orders and granting relief to the assessee.

In conclusion, the judgment favored the assessee, leading to the allowance of the appeal filed. The decision highlighted the importance of considering all relevant circumstances and the principle that the actions or inactions of a representative should not unreasonably penalize the principal party, especially in cases involving penalty provisions under tax laws.