2017 (3) TMI 533 - AT - Income Tax

Penalty u/s 271(1)(b) - non-compliance of notice u/s. 142(1) - Held that - Penalty will not be imposed on the assessee if he proves that there was reasonable cause for the said failure. Now coming to the case on hand, it is not in doubt that the wife of assessee was suffering from cancer as evident from the order of Hon ble ITAT in assessee s own case for AYs 2004-05 to 2009-10 2014 (12) TMI 217 - ITAT KOLKATA As there was sufficient reasonable cause which prevented the assessee to comply with the notice issued u/s 142(1) by AO. Accordingly, we, therefore, set aside the order of Ld. CIT(A) and direct the AO to cancel the penalty u/s 271(1)(b) - Decided in favour of assessee

Summary

Issues:
- Penalty imposed under section 271(1)(b) of the Income Tax Act, 1961 for non-compliance of notice u/s 142(1).
- Reasonableness of cause for non-compliance and applicability of penalty under section 273B.

Analysis:
1. The case involved five appeals by the same assessee against penalty orders issued by the Income Tax Officer under section 271(1)(b) for assessment years 2004-05 to 2009-10. The appeals were heard together due to identical facts. The main issue raised was the confirmation of the penalty by the Commissioner of Income Tax (Appeals) (CIT(A)).

2. The assessee, an individual, was penalized for non-compliance with a notice issued under section 142(1) of the Act during assessment proceedings. The CIT(A) upheld the penalty, stating that the assessee failed to provide sufficient evidence of his wife's illness preventing him from attending the proceedings. The CIT(A) found continuous non-compliance without reasonable cause and confirmed the penalty.

3. The assessee appealed before the Appellate Tribunal, arguing that the CIT(A)'s order was arbitrary and illegal. The assessee claimed that the penalty was not justified on merits, and there were issues with the receipt of the penalty order. The Tribunal considered these grounds and the circumstances surrounding the non-compliance.

4. The Tribunal noted that under section 273B of the Act, no penalty shall be imposed if the assessee proves reasonable cause for the failure. Referring to a previous ITAT order in the assessee's case, which acknowledged the wife's illness as a reasonable cause for delay in filing appeals, the Tribunal found sufficient cause for non-compliance with the notice u/s 142(1). Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to cancel the penalty under section 271(1)(b).

5. In the subsequent appeals for assessment years 2005-06 to 2009-10, the Tribunal applied the same reasoning as in the lead case and allowed the appeals, considering the identical facts and issues. The Tribunal emphasized the importance of proving reasonable cause for non-compliance to avoid penalties under the Act.

6. Ultimately, the Tribunal allowed all the assessee's appeals, emphasizing the need for assessing reasonable cause for non-compliance with statutory notices to avoid penalties under the Income Tax Act. The Tribunal's decision highlighted the significance of providing valid reasons for non-compliance to avoid adverse consequences.