2022 (6) TMI 238 - AT - Income Tax

Penalty u/s 271(1)(c) - non-compliance of notice issued by AO under Section 142(1) during the course of reassessment proceedings - CIT-A held reopening of the assessment u/s 147/148 was based on wrong and incorrect reasons recorded, and secondly that the reassessment order dated 27.12.2017 passed by the AO was without jurisdiction and void ab-initio - HELD THAT - Once the quantum re-assessment itself is held to be void ab-inito and without jurisdiction , nothing survives so far as non compliances of notices u/s 142(1) of the 1961 Act, as the proceedings itself was vitiated , held to be bad in law and quashed , as it is also held by ld. CIT(A), NFAC, New Delhi , that reopening of the assessment was done based on wrong and incorrect reasons recorded. Thus, if the quantum proceedings itself are declared to be bad in law and quashed , then any non compliance on the part of the assessee to respond to notice issued u/s 142(1) during such proceedings which are held to be void ab inito and proceedings without jurisdiction , will not give rise to any cause of action for validly initiating penalty proceedings u/s 271(1)(b) for non compliance of notice issued u/s 142(1) during such proceedings , and hence consequently penalty proceedings itself are to be held to be bad in law, liable to be quashed. Thus, we order deletion of penalty levied by the AO u/s 271(1)(b) - Appeal of assessee allowed.

Issues Involved:
1. Non-service of notice as a reasonable cause for non-compliance.
2. Change of address and its impact on notice service.
3. Consideration of judgments cited by the appellant regarding change of address as a reasonable cause.
4. Validity of penalty proceedings under Section 271(1)(b) of the Income-tax Act, 1961.

Detailed Analysis:

1. Non-service of notice as a reasonable cause for non-compliance:

The assessee contended that no notice under Section 142(1) was served due to her absence from the last known address. The appellant argued that since she had shifted to Jaipur in 2014, no notice could be served at the Renusagar address. The CIT(A) dismissed this argument, stating that the assessee failed to provide evidence of non-service or a reasonable cause for non-compliance. The Tribunal, however, noted that the reassessment itself was later quashed by the CIT(A), NFAC, New Delhi, rendering any penalty for non-compliance moot.

2. Change of address and its impact on notice service:

The appellant had shifted from Renusagar to Jaipur in 2014 and claimed that she did not inform the Income Tax Department of her new address. The CIT(A) held that the AO correctly sent notices to the last known address and dismissed the appeal for lack of evidence regarding the change of address. The Tribunal observed that the assessee did not update her address in the PAN database, contributing to the issue. However, the reassessment was quashed, nullifying the penalty proceedings.

3. Consideration of judgments cited by the appellant regarding change of address as a reasonable cause:

The appellant cited judicial pronouncements to support her claim that a change of address constitutes a reasonable cause under Section 273B. The CIT(A) did not consider these judgments, leading to the dismissal of the appeal. The Tribunal noted that the reassessment was quashed due to incorrect reasons recorded for reopening and jurisdictional issues, which indirectly supported the appellant's argument.

4. Validity of penalty proceedings under Section 271(1)(b) of the Income-tax Act, 1961:

The AO initiated penalty proceedings for non-compliance with notices issued under Section 142(1) during reassessment. The CIT(A) upheld the penalty, but the Tribunal found that the reassessment was quashed by the CIT(A), NFAC, New Delhi, due to incorrect reasons for reopening and jurisdictional issues. Consequently, any non-compliance during such void proceedings could not justify penalty under Section 271(1)(b). The Tribunal ordered the deletion of the Rs. 10,000 penalty imposed by the AO.

Conclusion:

The Tribunal allowed the appeal, quashing the penalty imposed under Section 271(1)(b) due to the invalidity of the reassessment proceedings. The CIT(A)'s decision was based on the lack of evidence for non-service of notices and change of address, but the Tribunal's decision was influenced by the subsequent quashing of the reassessment itself.

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