2021 (12) TMI 544 - AT - Income Tax

Penalty order u/s 271(1)(b) - non-compliance of the notices - nonappearance before the learned assessing officer - Unexplained deposits to bank account - HELD THAT - Assessee has made representation before the assessing officer in the month of February 2014 that the bank account for which the reopening of the assessment has been made in case of the assessee has not operated by the assessee but was lying dormant for almost 3 years - As stated that somebody is misusing the bank account of the assessee. It was further informed to the assessing officer that assessee has filed a complaint in police about the fraud conducted on the assessee. These facts were stated before the assessing officer. The fact also shows that assessee is an individual is about 63 years and having a very meagre sources of the income. AO has mentioned in the penalty order that notices were issued to the assessee on 2 May 2013, 2 August 2013, 10 September 2013, 1 October 2013 and 17 October 2013 however it is disputed by the assessee that no such notices have been received by the assessee. Even otherwise the assessment order has been passed by AO u/s 144 of the income tax act - as the assessee itself has denied that he has entered into any such transaction of depositing some in cash or through clearing in his bank account for last two years naturally, assessee looking at his age as well as the smallness of the business, first approached the police authorities by making a complaint. In view of this we find that t There is a sufficient and reasonable cause with the assessee, irrespective of the addition made in the assessment order, for failure to comply with the notices to appear before the learned assessing officer. In view of the above facts we allow the appeal of the assessee and direct the learned assessing officer to delete the penalty u/s 271 (1) (b) - Decided in favour of assessee.

Summary

Issues Involved:
Penalty under Section 271(1)(b) of the Income Tax Act for non-compliance with notices issued by the Assessing Officer.

Detailed Analysis:

1. Background:
The appeal was filed against the penalty order under Section 271(1)(b) of the Income Tax Act, 1961, for the assessment year 2006-07. The penalty of ?80,000 was confirmed by the Commissioner of Income Tax (Appeals) against the assessee, Shri Gurmohan Singh, Proprietor of M/s. G. H. Associates.

2. Grounds of Appeal:
The grounds of appeal raised by the assessee included challenges to the confirmation of the penalty order, alleging errors in law and facts, lack of reasonable opportunity for being heard, and failure to serve alleged notices.

3. Facts and Assessment:
The assessee declared income of ?1,01,557 in the return filed for the assessment year. Notices were issued under Section 148 in 2013 regarding cash deposits in the bank account. The Assessing Officer estimated unexplained deposits and income, leading to the assessment of total income at ?99,73,119. Penalty proceedings were initiated due to non-compliance with notices.

4. Penalty Proceedings:
The Assessing Officer levied a penalty of ?80,000 for non-compliance with notices issued on eight different occasions. The assessee failed to provide reasons for non-appearance, leading to the penalty under Section 271(1)(b) of the Act.

5. Appeal and Arguments:
The assessee contended that the penalty should not have been levied as the bank account was misused without the assessee's knowledge. The assessee cited filing of a police complaint and lack of awareness about the transactions as reasons for non-appearance before the Assessing Officer.

6. Arguments and Defense:
The assessee, through the authorized representative, argued that the non-appearance was due to the misuse of the bank account by another individual. The senior citizen status of the assessee and the prompt action taken upon discovering the fraud were highlighted as justifications for non-compliance with the notices.

7. Department's Position:
The departmental representative supported the penalty, emphasizing the lack of sufficient cause for the assessee's non-appearance before the Assessing Officer.

8. Tribunal Decision:
After considering the contentions and reviewing the facts, the Tribunal found that there was a reasonable cause for the assessee's failure to comply with the notices. The Tribunal allowed the appeal, directing the deletion of the penalty of ?80,000 under Section 271(1)(b) of the Income Tax Act.

Conclusion:
The Tribunal's decision favored the assessee, acknowledging the circumstances leading to non-compliance with the notices and overturning the penalty imposed by the Assessing Officer. The appeal was allowed in favor of the assessee, emphasizing the reasonable cause for the non-appearance and directing the deletion of the penalty amount.