2016 (10) TMI 552 - AT - Income Tax

Penalty u/s 271(1)(b) - failure to comply with statutory notices issued u/s 142(1) of the Act - A.O. was of the opinion that the assessee has failed to offer proper explanation for nonattendance as on the date of hearing - contention of the assessee that non-attendance as on the date of hearing is not intentional, as the A.O. has called for voluminous information for 7 assessment years within a short period of 7 to 15 days - Held that - We find force in the arguments of the assessee for the reason that the assessee has appeared on all the occasions and furnished necessary information for completion of assessment which is evident from the fact that the A.O. has completed the assessment u/s 143(3) of the Act. Though, assessee initially not appeared before the A.O. in one or two occasions, the reason given by the assessee for nonappearance appears to be reasonable and bonafide. Therefore, we are of the view that the A.O. was not correct in levying penalty u/s 271(1)(b) of the Act. Though, the CIT(A) appreciated the facts, failed to consider the explanation offered by the assessee for the assessment year 2013-14, in view of voluminous information called for by the A.O. and also the assessment being a search assessment. Normally, search assessments are done for 7 years, wherein the assessee is required to furnish information at one stretch for all the assessment years, for which sufficient time is required. In the present case on hand, the A.O. has given 7 to 15 days time. In our opinion, it is difficult to gather all the required information within a short period. Therefore, we are of the view that the explanations offered by the assessee that he could not attend on the dates of hearing because of insufficient time to collect voluminous information appears to be reasonable and bonafide. Accordingly, we direct the A.O. to delete the penalty levied for the assessment year 2013-14. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the revision of the assessment order under Section 263 of the Income Tax Act, 1961.
2. Levy of penalty under Section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with statutory notices.

Issue-wise Detailed Analysis:

1. Legitimacy of the Revision of the Assessment Order under Section 263:

The primary issue was whether the Commissioner of Income Tax (CIT) was justified in revising the assessment order under Section 263 of the Income Tax Act, 1961. The CIT issued a show-cause notice proposing to revise the assessment order on the grounds that the Assessing Officer (AO) had erroneously assessed the cash found during a search operation as professional income instead of unexplained money under Section 69A, and had failed to apply Section 115BBE, which rendered the assessment order erroneous and prejudicial to the interest of the revenue.

The assessee contended that the AO had conducted a proper inquiry and accepted the cash found during the search as professional income. The assessee argued that the AO's order was neither erroneous nor prejudicial to the interest of the revenue, as the AO had examined the issue and accepted the explanations provided.

The Tribunal found merit in the assessee's argument, noting that the AO had indeed examined the issue of the cash found during the search and accepted it as professional income after considering the explanations. The Tribunal observed that the CIT's assumption of jurisdiction under Section 263 was not justified, as the AO had conducted a detailed inquiry and the assessment order was not prejudicial to the interest of the revenue. The Tribunal emphasized that the conditions for invoking Section 263, i.e., the order being erroneous and prejudicial to the interest of the revenue, were not satisfied in this case.

2. Levy of Penalty under Section 271(1)(b) for Non-compliance with Statutory Notices:

The second issue involved the imposition of a penalty under Section 271(1)(b) for the assessee's failure to comply with statutory notices issued under Sections 143(2) and 142(1). The AO levied a penalty of ?30,000 for non-compliance with the notices, stating that the assessee had not appeared on the dates fixed for hearings and had not provided any explanation for the non-appearance.

The assessee argued that the non-compliance was not intentional, as the AO had called for voluminous information within a short period, making it difficult to gather all the required information. The assessee contended that he had cooperated with the department and provided the necessary information for the completion of the assessment.

The CIT(A) partially upheld the penalty, noting that the assessee had failed to comply with the notices but had eventually provided the required information, leading to the completion of the assessment under Section 143(3). The Tribunal found the assessee's explanation reasonable and bona fide, considering the voluminous information required for the search assessment and the short time provided by the AO. The Tribunal directed the AO to delete the penalty, concluding that the non-compliance was not intentional and the assessee had cooperated with the assessment proceedings.

Conclusion:

The Tribunal quashed the order passed by the CIT under Section 263, restoring the AO's assessment order, and directed the deletion of the penalty levied under Section 271(1)(b), allowing the appeals filed by the assessee.