2017 (9) TMI 36 - AT - Income Tax

Proceedings u/s 153A initiated and assessment completed - Penalty proceedings initiated u/s 271(1)(b) during assessment - Non-compliance of statutory notices by assessee - Filing of reasonable cause for such Non Compliance - venial breach - Held that - The assessee is mainly aggrieved by the levy of penalty of ₹ 20,000/- u/s 271(1)(b) for all the impugned assessment years, which was on account of failure to comply with the 2 statutory notices/date fixed for hearing on 30.11.2012 and 27.12.2012. The assessee filed very detailed explanation, challenging the validity of initiation of penalty proceedings and explaining the reasonable cause for non-compliance on the appointed days firstly, the key person/group head, Shri Gopal Kumar Goyal who was entrusted with income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release and various employees were leaving the group further accentuating the problems; secondly, more than 300 group assessments were initiated in the wake of search proceedings which were simultaneously going on, therefore, it was difficult to comply to the various notices on short dates; lastly, it has been strongly pleaded before us, that the compliances had been made through replies filed through dak or registered post though belatedly. These facts have not been controverted by the AO or CIT (Appeals). Thus all it constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause. Also demand in the quantum proceedings has been reduced to nil , after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(b) for failure to comply with statutory notices for A.Ys. 2004-05 to 2008-09.

Analysis:
The appeals were filed against a common impugned order dated 11/5/2015 related to penalty proceedings under section 271(1)(b) for multiple assessment years. The primary grievance was the imposition of a penalty of ?20,000 for non-compliance with statutory notices. The Assessing Officer initiated penalty proceedings due to the failure to comply with notices fixed for hearing on specific dates. The assessee challenged the penalty by providing detailed explanations, citing reasons such as vague penalty notices, compliance through replies submitted via dak counter or registered post, difficulties in managing numerous assessments, and the detention of a key person responsible for tax matters. The Assessing Officer and CIT(Appeals) upheld the penalty, emphasizing the lack of reasonable cause for non-compliance with statutory notices.

The CIT(Appeals) rejected the reasons provided by the assessee, stating that factors such as search operations, detention of key personnel, and the volume of assessments in other cases were not valid justifications for non-compliance. It was emphasized that the burden of assessments was on the Assessing Officer, and the reasons cited did not constitute reasonable cause for non-compliance. The CIT(Appeals) also highlighted that the filing of writ petitions did not excuse non-compliance with statutory notices. The penalty under section 271(1)(b) requires a valid reason for failure to comply with notices, which was deemed lacking in this case.

During the proceedings, the assessee contended that exhaustive replies were submitted, assessments were completed with nil income, and penalties should not apply due to reasonable cause for the delay in filing replies. The DR supported the findings of the CIT(Appeals). The Tribunal noted the vague nature of the penalty notice and the submission of replies during the assessment proceedings. The Tribunal considered the overall conduct of the assessee, acknowledging the challenges faced due to the detention of a key person and the volume of group assessments. It was concluded that there was a reasonable cause for the delay in compliance, and the penalty was unsustainable. The penalty of ?20,000 for all assessment years was directed to be deleted.

The Tribunal's decision applied uniformly to all appealed years, leading to the allowance of the assessee's appeals.