2020 (8) TMI 6 - AT - Income Tax

Levy of penalty u/s 271(1)(b) - non-compliance to first notice issued u/s 142(1) - reasonable cause for non-compliance in terms of section 273B - HELD THAT - Information/documents so sought by the AO necessarily have to be provided by the assessee to the authorized representative - There is nothing on record which demonstrate that such documents were either in the possession of the authorized representative at the time of initial hearing and he wanted time to go these documents before submitting to the AO or the assessee has subsequently submitted these documents to the authorized representative to be submitted to the AO which the authorized representative failed to submit before the AO. Though there is non-appearance on part of the authorized representative at the second scheduled date of hearing, at the same time, the possibility of non-availability of the requisite documents as so required by the Assessing officer cannot be ruled out. In absence of these facts and without confronting the authorized representative, we are unable to accede to the contention of the assessee that merely because she has authorized a Chartered accountant, the entire fault lies with the Chartered accountant and assessee cannot be faulted as the non-compliance is by way of non-filing of the information/documents so sought by the Assessing officer and not limited to attending to the proceedings before him. Penalty proceedings were not found acceptable to the Assessing officer, the assessee should have been allowed another opportunity to put worth her contentions on merits of levy of penalty. AO without providing any such opportunity to the assessee, passed the penalty order. Therefore, on this ground itself, where there is lack of opportunity before levy of penalty, the penalty so levied deserved to be set-aside. Further, we find that there is no independent finding recording by the AO while levying the penalty and merely referring to the findings in the assessment order, he has arrived at a conclusion that the assessee has willfully not complied with the notices and not co-operated in finalizing the assessment proceedings. It is a settled position that assessment and penalty proceedings are two separate and distinct proceedings and though reference can be drawn to the findings in the assessment order, the AO has to record independent findings as to why penalty may be levied in the given case which we find lacking in the instant case and penalty so levied therefore cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against the order of levy of penalty U/s 271(1)(b).
2. Consideration of written submissions by the assessee.
3. Non-compliance with notices U/s 142(1) and subsequent penalty levy.
4. Reasonable cause for non-compliance.
5. Validity of penalty based on assessment order status.
6. Lack of opportunity before levy of penalty.
7. Independent findings required for penalty imposition.

Analysis:

1. The appeal was filed against the order of the ld. CIT(A) for the assessment year 2010-11, where the penalty U/s 271(1)(b) was partly sustained at ?10,000 instead of ?20,000 imposed by the Assessing Officer.

2. The assessee did not appear during the proceedings, but an application was submitted requesting consideration of written submissions. The Tribunal decided to hear the matter after reviewing the written submission, along with the ld. DR and available records.

3. The penalty proceedings were initiated due to non-compliance with two notices U/s 142(1) dated 09.10.2017 and 31.10.2017. The ld CIT(A) reduced the penalty to ?10,000, citing that subsequent default is a continuation of the initial default, and penalty cannot be imposed for each default.

4. The main issue revolved around the non-compliance with the first notice dated 9.10.2017 and the levy of penalty U/s 271(1)(b), questioning the reasonable cause for non-compliance. The assessee claimed that being illiterate, she appointed a Chartered Accountant who failed to comply, but the Tribunal found no evidence of the required documents being submitted.

5. The contention regarding the assessment order being void ab-initio was dismissed as there was no official declaration to that effect. The Tribunal highlighted that the penalty under section 271(1)(b) can be imposed independently of tax liability.

6. The Tribunal noted that the assessee was not given a fair opportunity to present her case before the penalty was levied, which was a procedural error. Additionally, the lack of independent findings by the Assessing Officer for penalty imposition was highlighted.

7. Considering the lack of opportunity and absence of independent findings, the Tribunal set aside the penalty imposed and sustained by the ld CIT(A), ruling in favor of the assessee and against the Revenue.

This detailed analysis covers the issues raised in the legal judgment comprehensively, addressing each point with relevant legal considerations and the Tribunal's findings.