2017 (9) TMI 1352 - AT - Income Tax

Penalty u/s 271(1)(b) - reasonable cause for failure to comply with the notices - proceedings u/s 153A - proof of meaningful compliance of notices at the assessment proceedings u/s 153A - Held that - CIT(A) instead of considering the explanation of assessee in proper perspective, proceeded on different reasoning to reject the appeals of the assessee that settlement applications have been subsequently on 25.02.2014 after issue of the above two notices. When complete seized documents have not been provided to assessee and some of the seized documents provided were not legible, the assessee may not be able to file return of income u/s 153A of the Income Tax Act. Therefore, there is no question of assessee making meaningful compliance of notices at the assessment proceedings u/s 153A read with section 143(3) of the Act Income Tax Act. The explanation of the assessee have not been appreciated by the Ld. CIT(A), therefore, explanation of assessee shall be considered favourable to hold that there appears reasonable cause for the assessee for the non compliance of both the notices. Section 273B of the Income Tax Act provides that no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to section 271(1)(b) of the Act, if assessee proves that there was a reasonable cause for the said failure. The explanation of assessee clearly proves that there were a reasonable cause for failure to comply with the notices. Therefore, on such circumstances the penalty u/s 271(1)(b) for all the years cannot be sustained. We set aside the orders of authority below and cancel the penalty in all the assessment years. - Decided in favour of assessee.

Summary

Issues:
Challenging the levy of penalty u/s 271(1)(b) of the Income Tax Act for assessment years 2006-07 to 2012-13.

Analysis:
1. The appeals by the assessee contested the penalty orders issued by the Ld. CIT(A) for non-compliance with notices under the Income Tax Act. The AO levied penalties due to the assessee's failure to respond to statutory notices, resulting in willful non-compliance. The penalty was imposed under section 271(1)(b) of the Act, amounting to ?20,000 for each instance of non-compliance.

2. The assessee explained to the Ld. CIT(A) that incomplete seized documents and illegible material hindered the filing of returns under section 153A, leading to non-compliance with the notices. Despite expressing concerns over the phone to the AO, no formal representation was made. The assessee argued that the non-compliance was due to uncontrollable circumstances and not deliberate evasion.

3. The Ld. CIT(A) dismissed the appeals, noting that the settlement applications filed by the assessee after the notices indicated no reasonable cause for the non-compliance. However, the Ld. CIT(A) directed that if settlements were awarded in favor of the assessee, the penalties would not stand.

4. Upon review, the Tribunal found that the assessee's explanation for non-compliance was valid. The Tribunal highlighted that section 273(B) of the Income Tax Act exempts penalties if a reasonable cause for failure is proven. As the assessee demonstrated valid reasons for non-compliance, the penalties under section 271(1)(b) for all years were canceled.

5. Consequently, the Tribunal set aside the lower authorities' orders and revoked the penalties for all the assessment years in question, allowing all the appeals of the assessee.

Conclusion:
The Tribunal ruled in favor of the assessee, canceling the penalties imposed under section 271(1)(b) for non-compliance with statutory notices. The decision was based on the assessee's valid reasons for the failure to respond, as supported by the provisions of the Income Tax Act.