2021 (3) TMI 458 - AT - Income Tax

Penalty levied u/s. 271(1)(b) - non compliance of notice issued u/s. 142(1) - addition on account of cash deposits in two bank accounts where the assessee is the first account holderwhile passing the assessment u/s. 144 - HELD THAT - In response to the notices issued u/s. 142(1), the representative of the assessee has appeared and filed reply and stated that the similar notice regarding cash deposit in case of her husband has also been issued. In the said reply, the assessee sought time to file her return of income however there was no further response on the part of the assessee. Accordingly, the Assessing Officer issued another notice dated 10.12.2018 giving final opportunity to assessee to explain the cash deposit in the bank account but there was no compliance, consequently Assessing Officer framed the assessment u/s. 144 and also initiated the penalty proceedings u/s. 271(1)(b) of the Act. All the bank accounts are in the joint name of the assessee and her husband. The explanation and addition made in the hand of the husband of the assessee would be relevant and shall have a bearing in the case of the assessee. The quantum appeals are still pending before the CIT(A) and the penalty appeals have been dismissed by the CIT(A) by ex parte order. Therefore, in the facts and circumstances of the case, where all the bank accounts are in the joint name and the Ld. CIT(A) has passed the impugned ex parte order without deciding the quantum appeals the matter is set aside to the record of the CIT(A) for deciding the same afresh after adjudication of the quantum appeals and giving more opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues: Appeal against penalty u/s. 271(1)(b) of the Income Tax Act, 1961 for A.Y. 2011-12.

Analysis:
1. Assessee's Grounds for Appeal: The assessee challenged the penalty imposed under section 271(1)(b) of the Act, arguing that the penalty was unjustified both factually and legally. The assessee contended that there was no intentional non-cooperation with the department, and any non-compliance was due to unavoidable circumstances. Additionally, the assessee highlighted the absence of past penalties or non-compliance instances, reserving the right to introduce new grounds of appeal.

2. Assessee's Submission: The assessee filed the income return for the relevant assessment year, declaring a total income. The penalty was levied for non-compliance with a notice issued under section 142(1) of the Act. The assessee's representative pointed out that the bank accounts in question were jointly held with the husband, who also received similar notices. The assessee believed the husband would address the deposit sources. The assessee responded to the show-cause notice issued under section 274, emphasizing the parallel proceedings initiated by the Assessing Officer regarding the joint accounts.

3. Revenue's Argument: The Revenue argued that the Assessing Officer correctly assessed income from cash deposits in bank accounts held jointly by the assessee and her husband. Non-compliance with the notice under section 142(1) was cited as the basis for justifying the penalty under section 271(1)(b) of the Act.

4. Judgment: The Assessing Officer initiated penalty proceedings based on cash deposits in bank accounts held jointly by the assessee and her husband. Despite the assessee's initial response to notices, subsequent non-compliance led to the assessment and penalty proceedings. The Tribunal noted that the quantum appeals were pending, and the penalty appeals were dismissed ex parte. Considering the joint ownership of bank accounts and the incomplete assessment due to pending quantum appeals, the Tribunal set aside the matter for the CIT(A) to re-examine after deciding the quantum appeals and allowing further hearing to the assessee.

5. Conclusion: The appeal by the assessee was allowed for statistical purposes, emphasizing the need for a comprehensive review of the penalty in light of the joint ownership of bank accounts and the pending quantum appeals, ensuring fair adjudication and due process.