2022 (9) TMI 1391 - AT - Income Tax

Penalty u/s 271(1)(b) - notice issued on wrong person u/s 142(1) - HELD THAT - Notice were admittedly issued and served upon one Shri Chaitanya Kochar, who was neither a Director nor a Shareholder or the Principal Officer of the assessee company. Shri Chaitanya Kochar and his family members, as per the Departmental record, were directors of a group of bogus companies engaged in providing accommodation entries. As relevant to mention that the appeals are against the imposition of penalty u/s.271(1)(b) which talks of imposing penalty for non-compliance with the notice issued by the Department under certain sections including section 142(1). Merits of the additions become irrelevant insofar as the question of issuance of notice and the consequential penalty u/s.271(1)(b) is concerned. It goes without saying that notice u/s.142(1) needs to be properly served on the assessee who is required to submit his reply. If notice is served on a wrong person, who is not authorized to receive the same, it cannot be said that the assessee is at fault in not responding to such notice. As apparent from the factual panorama recorded above that the notices were issued by the AO on a person who was not authorized to receive them on behalf of the assessee company. In such circumstances, there can be no question of imposing or confirming any penalty u/s.271(1)(b) - We delete the penalty for all the years under consideration. Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(b) of the Income-tax Act, 1961 for A.Y. 2002-03 to 2008-09.

Analysis:
The judgment pertains to seven appeals challenging a consolidated order confirming penalties imposed by the Assessing Officer (AO) under section 271(1)(b) of the Income-tax Act, 1961 for the assessment years 2002-03 to 2008-09. The assessee was subjected to search and assessments were framed ex parte under section 153C of the Act. For the A.Y. 2002-03, the AO issued a notice under section 142(1) for certain details, which the assessee did not comply with. Subsequently, a notice under section 271(1)(b) was issued, and as the assessee did not submit any explanation, a penalty of Rs.10,000 was imposed. The assessee contended that the notice under section 142(1) was not received as it was served on a person not authorized to receive it. The CIT(A) affirmed the penalty, leading to the appeal before the Tribunal.

The Tribunal noted that the notices leading to the penalties were served on a person not authorized to receive them, who was associated with bogus companies. The issue revolved around the proper service of notices under section 142(1) for penalty under section 271(1)(b). The Tribunal emphasized that the merits of the additions become irrelevant concerning the issuance of notices and consequential penalties. It was held that if a notice is served on an unauthorized person, the assessee cannot be faulted for non-compliance. As the notices were not served on the authorized representative of the assessee company, the Tribunal concluded that no penalties under section 271(1)(b) could be imposed or confirmed.

In conclusion, the Tribunal allowed all the appeals, ordering the deletion of penalties for all the years under consideration. The judgment highlighted the importance of proper service of notices and the consequences of serving notices on unauthorized individuals. The decision focused on upholding procedural fairness in penalty proceedings under the Income-tax Act, 1961.