2021 (7) TMI 722 - AT - Income Tax

Penalty u/s 271(1)(c) - non-compliance on the part of the assessee of various notices issued seeking explanation of the cash deposits in the bank accounts - HELD THAT - From the observation of the Ld. first appellate authority in quantum appellate proceeding, we find that he has decided the appeal on the basis of the submission and explanation which were filed before the Assessing Officer without taking any additional evidence on record. This means that information which was required for completing the assessment was already filed by the assessee before the AO and non-attendance or non-filing of information by the AO in response to various notices is rendered merely a technical or venial breach when the addition has already been deleted by the CIT(A) in quantum appeal proceedings keeping in view the explanation regarding the source of cash deposits. In view of Section 273B of the Act, when the assessee has complied with the notice issued by the AO the penalty was not imposable as the explanation filed by the assessee was finally found to be correct and accepted in the quantum appeal. In view of the above facts and circumstances, we do not find any justification for sustaining the penalty levied by the Assessing Officer- Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Legality of penalty upheld by the CIT(A) under section 271(1)(b) of the Income-tax Act, 1961.
2. Alleged non-compliance with notices during assessment proceedings.
3. Validity of reassessment proceedings.
4. Justification for non-compliance and whether it constitutes a reasonable cause under section 273B.
5. Consideration of technical or venial breaches in the context of penalty imposition.

Issue-wise Detailed Analysis:

1. Legality of Penalty Upheld by the CIT(A) Under Section 271(1)(b):
The appeal challenges the order dated 10/05/2019 by the CIT(A), which upheld a penalty of ?70,000 against the initial penalty of ?80,000 levied by the Assessing Officer (AO) under section 271(1)(b) for non-compliance with notices during the assessment year 2010-11. The CIT(A) deleted the penalty for one instance of non-compliance but upheld it for the remaining seven instances.

2. Alleged Non-Compliance with Notices During Assessment Proceedings:
The AO initiated penalty proceedings due to the assessee's non-compliance with notices issued under sections 143(2) and 142(1). The CIT(A) summarized the non-compliances and upheld the penalty, noting that the assessment was completed under section 144 (best judgment assessment) due to repeated failures to comply with notices. The CIT(A) referred to the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs. Assistant Director of Income Tax, which held that non-compliance is waived if the assessment is not under section 144.

3. Validity of Reassessment Proceedings:
The reassessment proceedings were initiated due to observed cash deposits of ?14,89,775 in the assessee's bank account. The assessee filed a return declaring ?1,89,280 in response to the notice under section 148. The case was transferred to another AO, who completed the assessment under section 144. The assessee contended that the reassessment lacked jurisdiction and that objections to reopening were not addressed by the AO.

4. Justification for Non-Compliance and Reasonable Cause Under Section 273B:
The assessee argued that the non-compliance was due to the AO's failure to provide reasons for reopening the assessment and not addressing preliminary objections. The CIT(A) observed that section 273B provides that no penalty shall be imposed if there is a reasonable cause for non-compliance. However, the CIT(A) found that the assessee failed to justify the non-compliance and upheld the penalty.

5. Consideration of Technical or Venial Breaches:
The assessee contended that the non-compliance was technical or venial, as the necessary information was ultimately provided and accepted in the quantum appeal, leading to the deletion of additions. The Tribunal noted that the CIT(A) deleted the addition based on the assessee's explanations, indicating that the information was already with the AO. The Tribunal found that the non-compliance was a technical breach and that the penalty was not justified under section 273B, as the explanation was accepted in the quantum appeal.

Conclusion:
The Tribunal concluded that the penalty was not justified and cancelled the penalty sustained by the CIT(A). The appeal filed by the assessee was allowed, and the Tribunal emphasized that technical or venial breaches should not attract penalties, especially when the explanations provided were ultimately accepted.

Order Pronounced:
The appeal was allowed, and the order was pronounced in the open court on 9th July, 2021.