2020 (5) TMI 460 - AT - Income Tax

Penalty u/s 271(1)(b) - assessee has not complied with the notice u/s.142(1) - Assessment u/s 153A - assessee has not furnished the requisite information/document, i.e., complete bank statement as well as failure to give consent letter - HELD THAT - Once there was no incriminating material, neither any such information was available with AO, then where is the question of roping such an addition or making such inquiry in the assessment proceedings. If there would have been any incriminating document pertaining to the alleged bank account found directly or indirectly linking the said bank account with the assessee during the course of search, then only the entire scope of inquiry for the purpose of assessment could have been made; and if there is no such incriminating material or seized document, then ostensibly assessment has to be confined to the seized document relating to the assessee. Here the information which was available prior to the date of search was itself vague in so far as there was no mention of any account with HSBC Geneva Switzerland for which AO has levied the penalty that the assessee has not signed the consent waiver form. Consent waiver form was addressed to the HSBC Bank Geneva Switzerland and when the information itself did not mention such bank account, then where was the default of the assessee. It could be very difficult to justify the levy of penalty for non compliance of notice u/s. 142(1), firstly, when the scope of inquiry by the AO is circumscribed to material found during the course of search; and secondly, there is no specific information or document that the assessee was maintaining any account with HSBC Bank Geneva Switzerland. There is no provision u/s.142(1) that assessee is required to sign the document thrust upon him when the assessee himself has denied the content of the document and denied having maintaining such bank account. Penalty u/s. 271(1)(b) is leviable only when there is failure on the part of the assessee to comply with the notice issued u/s.142(1). Here there is no failure on part of the assessee for non compliance as assessee has duly replied and filed submission before the AO and also before the Ld. CIT (A). The assessee thus can produce any such document or account, which is necessary for the purpose of making an assessment; or if assessee is having such account or document, then if required by the Assessing Officer, he has to file or produce the same. If assessee is neither having such document nor she was in possession of any such document or is denying the document, then where is the question of default on the part of the assessee in terms of Section 142(1). Nowhere Section provides that the assessee has to create a document for furnishing it before the Assessing Officer what is contemplated is that whatever the information or document or account is available with the assessee the same has to be produced before the AO. We are in tandem with the submission of Mr. Bindal that there is genuine and bona fide belief that the assessee was not require to sign the consent waiver form, because as per the averments made by assessee, he never had any kind of bank account in overseas leave alone HSBC Bank Geneva Switzerland; and secondly, nothing incriminating was found during the course of search wherein the assessee was found to be directly or indirectly involved in opening any bank account with HSBC Geneva Switzerland. If all these circumstances have been duly explained before the AO, then not signing of consent waiver form constitutes reasonable cause and therefore in terms of Section 273 B penalty is leviable. Accordingly, the penalty is deleted on this count also. - Appeals of the assessee are allowed.

Summary

Issues Involved:
1. Legitimacy of the penalty levied under Section 271(1)(b) for non-compliance with notice under Section 142(1).
2. Validity of the search and seizure action under Section 132(1) and subsequent proceedings under Section 153A.
3. Requirement and justification for signing the consent waiver form for the alleged HSBC Geneva Switzerland bank account.

Issue-wise Detailed Analysis:

1. Legitimacy of the penalty levied under Section 271(1)(b) for non-compliance with notice under Section 142(1):

The core issue pertains to the penalty of ?10,000/- levied on the assessee for non-compliance with a notice issued under Section 142(1). The notice required the assessee to provide details of an alleged HSBC Geneva Switzerland bank account. The assessee responded by denying any connection with the alleged account and refused to sign the consent waiver form. The Tribunal noted that the assessee had consistently denied the existence of such an account and had complied with the notice by submitting a detailed response. The Tribunal emphasized that Section 142(1) empowers the Assessing Officer to call for documents necessary for making an assessment, but the assessee cannot be penalized for failing to produce documents that do not exist or are not in their possession. The Tribunal concluded that there was no failure on the part of the assessee to comply with the notice under Section 142(1), thereby invalidating the penalty.

2. Validity of the search and seizure action under Section 132(1) and subsequent proceedings under Section 153A:

The search and seizure action under Section 132(1) led to the issuance of notices under Section 153A for six assessment years prior to the year of the search. The Tribunal observed that no incriminating material or evidence was found during the search or subsequent assessment proceedings to substantiate the existence of the alleged HSBC Geneva Switzerland bank account. The Tribunal referenced its earlier decision where it was held that the additions made in the assessments under Section 153A/143(3) were not sustainable as they were beyond the scope of the proceedings under Section 153A. The Tribunal reiterated that the scope of inquiry for making an assessment under Section 153A is confined to the incriminating material found during the course of the search. Since no such material was found, the Tribunal held that the entire basis for the penalty and the related proceedings was flawed.

3. Requirement and justification for signing the consent waiver form for the alleged HSBC Geneva Switzerland bank account:

The notice under Section 142(1) included a request for the assessee to sign a consent waiver form to obtain details from HSBC Geneva Switzerland. The Tribunal scrutinized the information available with the Department and found that there was no specific mention of an HSBC Geneva Switzerland account in the documents. The Tribunal noted that the assessee had categorically denied having any such account and had not been confronted with any concrete evidence to the contrary. The Tribunal held that there is no provision under Section 142(1) that mandates an assessee to sign a document or consent waiver form when they deny the existence of the alleged account. The Tribunal further stated that the penalty under Section 271(1)(b) is applicable only when there is a failure to comply with the notice under Section 142(1). Given that the assessee had duly replied and filed submissions, the Tribunal found no justification for the penalty. Additionally, the Tribunal acknowledged the bona fide belief of the assessee that he was not required to sign the consent waiver form, thus constituting a reasonable cause under Section 273B, which provides for the non-levy of penalty in cases of reasonable cause.

Conclusion:

The Tribunal allowed all the appeals of the assessee, setting aside the penalties levied under Section 271(1)(b) for all the assessment years in question. The judgment emphasized the importance of concrete evidence and the limitations of the scope of inquiry under Section 153A, reinforcing the principle that penalties cannot be imposed without substantiated non-compliance.