2017 (9) TMI 37 - 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 non-compliance with statutory notices.

Analysis:
The appeals were filed against a common order related to penalty proceedings under section 271(1)(b) for the assessment years 2007-08 & 2008-09. The main issue was the imposition of a penalty of ?20,000 for failure to comply with statutory notices on specific dates. The assessee challenged the penalty, arguing that the penalty notice was vague and did not specify the non-compliance details. The assessee provided detailed explanations, citing reasons such as the difficulty in complying with numerous notices, the detention of the key person responsible for tax matters, and the submission of replies through registered post or dak. The Assessing Officer and the CIT (Appeals) upheld the penalty, emphasizing the lack of valid reasons for non-compliance. They rejected the reasons provided by the assessee, stating that the pendency of other assessments or writ petitions did not justify non-compliance with the specific notices. The authorities found no reasonable cause for the failure to comply with the statutory notices.

The Tribunal analyzed the case, noting that the penalty notice lacked specificity and that the assessee did not attend proceedings on certain dates. The assessee's explanation for non-compliance included the detention of the key person and the ongoing court proceedings involving family members. The Tribunal observed that the assessee had filed replies during the assessment proceedings, albeit belatedly. Considering the circumstances, the Tribunal found that there was a reasonable cause for the delay in compliance. The Tribunal highlighted the genuine difficulties faced by the assessee due to the key person's absence and the large number of group assessments. The Tribunal concluded that the failure to comply with the notices was due to reasonable causes as presented by the assessee. Moreover, the reduction of the demand to nil in quantum proceedings indicated technical rather than substantive non-compliance. Therefore, the Tribunal ruled in favor of the assessee, directing the deletion of the penalty for all assessment years.

In conclusion, the Tribunal allowed the appeals, emphasizing that the penalty under section 271(1)(b) was unsustainable due to valid reasons presented by the assessee for non-compliance with statutory notices. The Tribunal's decision applied uniformly to all the years under consideration, leading to the deletion of the penalties imposed.