2022 (3) TMI 720 - AT - Income Tax

Penalty levied u/s. 272A (1)(c) - non compliance with summons issued under section 131(1A) - appellant neither attended on the appointed date nor till the date of passing of the penalty order - HELD THAT - There is no finding of the AO based on some contradictory evidence to disapprove that explanation offered by the assessee was false or the assessee was not able to substantiate the explanation furnished or fails to prove that such explanation is not bona fide and that all the facts relating to the same and material to the computation of his total income has not been disclosed by him. We further arrive at a conclusion that ignorance of law is certainly no excuse for a default committed but, at the same time, there is no presumption in law that everybody knows the law. The application of this rule would differ from case to case and person to person. In a given case, there may be a person who is quite illiterate, living in remote village, rarely coming in touch with law enforcing machinery and not required to discharge any statutory obligations under a particular law. Ignorance of law may be a good excuse in his case. As submitted by the Ld AR for assessee that there is no willful failure to comply the with summons u/s 131(IA) of the IT Act dated 04.10.2013. Therefore the order on the CIT (A) is accordingly set aside and thus penalty u/s 272A(1)(c) levied by the AO is not in accordance with law therefore same is cancelled. In the result appeal of assessee is allowed.

Summary

Issues Involved:
- Penalty imposed under section 272A(1)(c) of the Income Tax Act, 1961 for non-compliance with summons.
- Assessment of penalty for failure to furnish information under section 133(6) of the Income Tax Act.

Analysis:

Issue 1: Penalty imposed under section 272A(1)(c) for non-compliance with summons:
The appellant challenged the penalty imposed by the Joint Director I & CI under section 272A(1)(c), arguing that all replies and information requested by the Assessing Officer were provided, making the penalty illegal. The Commissioner of Income-tax (Appeals) upheld the penalty, stating that the appellant willfully failed to comply with the summons under section 131(1A) of the IT Act. The appellant was given multiple hearing opportunities, but there was no compliance or request for adjournment, indicating a lack of interest in contesting the appeal. The Tribunal observed that while ignorance of the law is not an excuse for default, not everyone is expected to know all laws. The Tribunal found no evidence to disprove the appellant's explanation and concluded that there was no willful failure to comply with the summons. Consequently, the penalty imposed by the AO was deemed not in accordance with the law and was canceled.

Issue 2: Assessment of penalty for failure to furnish information under section 133(6):
In this case, a penalty was levied under section 272A(2)(c) for non-compliance with a notice under section 133(6) of the Income Tax Act. The appellant argued that being a small business contractor, they were unaware of the notices and the procedure to respond to them, leading to delays in compliance. The Commissioner of Income-tax (Appeals) confirmed the penalty, noting the appellant's delay in replying to the notice and complying with the summons. However, the Tribunal found no contradictory evidence to refute the appellant's explanation and emphasized that ignorance of the law may be a valid excuse in certain circumstances. The Tribunal set aside the order of the CIT (A) and canceled the penalty, considering the subsequent compliance by the appellant despite the delay.

In conclusion, the Tribunal allowed both appeals of the assessee, canceling the penalties imposed in both cases.