2017 (2) TMI 639 - AT - Income Tax

Levy of penalty u/s 271(1)(b) r.w.s. 274 - assessing officer has completed assessment u/s 143(3) r.w.s. 153C - non-appearance for hearing by assessee - Held that - Following the coordinate bench decision, in the case of Pillala Ramakrishna Rao Vs. ACIT (2016 (10) TMI 552 - ITAT VISAKHAPATNAM) we are of the view that the reasons given by the assessee for non-appearance for hearing as on the date of hearing appears to be reasonable and bonafide. The A.O. has given short period of 7 days to 26 days to furnish various information in connection with search assessment. Though, the assessee failed to appear on initial days, he had furnished all the information and the A.O. has completed assessment u/s 143(3) r.w.s. 153C of the Act. Therefore, we are of the view that the A.O. was erred in levying penalty for initial failure to comply with statutory notices u/s 143(2) & 142(1) of the Act, despite the fact that the assessee had fully cooperated for completion of assessment proceedings. Therefore, we direct the A.O. to delete penalty levied u/s 271(1)(b) of the Act, for the assessment years 2007-08 to 2013-14.- Decided in favour of assessee

Issues:
Appeals against levy of penalty u/s 271(1)(b) for failure to comply with statutory notices u/s 142(1) & 143(2) of the Income Tax Act, 1961.

Analysis:
1. The appeals were filed against a common order passed by the CIT(A)-3, Visakhapatnam, for the assessment years 2007-08 to 2013-14, partly sustaining the levy of penalty u/s 271(1)(b) r.w.s. 274 of the Act. The cases were clubbed together due to identical facts and common issues.

2. The assessee was subjected to search operations under section 132 of the Act after a search & seizure action in the case of M/s. Gayatri Constructions. The assessment proceedings u/s 153C of the Act were initiated, and the assessee filed returns of income for the relevant years. The AO initiated penalty proceedings for failure to comply with statutory notices issued u/s 142(1) & 143(2) of the Act, as the assessee did not appear or furnish required information.

3. The assessee explained difficulties in gathering information for 7 years within the short time provided in the notices. Despite complying with the information eventually, the AO levied penalties for non-attendance on the hearing dates. The assessee contended that the penalty was unjustified as assessment was completed satisfactorily.

4. The AO, however, held that the assessee failed to appear or seek adjournment without valid reasons, leading to the levy of penalties for each failure to comply with statutory notices. Penalties of ?30,000 each were imposed for assessment years 2007-08 to 2013-14.

5. The assessee appealed to the CIT(A), reiterating cooperation during assessment and citing difficulties in meeting the short notice period for furnishing voluminous information. The CIT(A) held that non-compliance without persistent intention does not warrant penalties. Penalties were upheld for cases with longer notice periods but deleted for cases with shorter notice periods.

6. The CIT(A) relied on precedents and directed the AO to delete penalties where short notice periods were given, as non-compliance was technical. However, penalties were upheld for longer notice periods where the assessee failed to offer explanations.

7. During the appeal hearing, the assessee cited a similar case decided by the ITAT, Visakhapatnam, where penalties were deleted under comparable circumstances. The assessee sought deletion of penalties based on this precedent.

8. The DR supported the CIT(A)'s order, emphasizing the adequacy of time given for compliance and the assessee's failure to appear or seek adjournment.

9. The ITAT considered the contentions of both parties and reviewed the orders of the authorities below. The issue revolved around the imposition of penalties for non-compliance with statutory notices. The assessee's argument of insufficient time to collect information was deemed reasonable and bonafide.

10. Referring to a similar case, the ITAT found the assessee's explanations plausible and directed the AO to delete the penalties for all the assessment years in question. The ITAT concluded that the AO erred in levying penalties despite the assessee's cooperation in completing the assessment proceedings.

11. Following the precedent and considering the circumstances, the ITAT found the reasons for non-appearance reasonable and directed the deletion of penalties for all the assessment years involved. The ITAT emphasized the assessee's cooperation in furnishing information despite initial non-attendance.

12. Consequently, the appeals filed by the assessee were allowed, and the penalties levied under section 271(1)(b) of the Act for the assessment years 2007-08 to 2013-14 were deleted.

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