2005 (2) TMI 433 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the penalty order under Section 271(1)(a) of the Income Tax Act, 1961.
2. Justification for the delay in filing the return of income.
3. Proper service of notice under Section 274 of the Income Tax Act, 1961.
4. Opportunity to be heard before imposing the penalty.

Detailed Analysis:

1. Legality of the Penalty Order under Section 271(1)(a):
The assessee contended that the penalty order was invalid as the Assessing Officer (AO) did not record proper satisfaction. The learned counsel relied on judgments from the Punjab & Haryana High Court and the Delhi High Court to support this claim. However, the Tribunal found no merit in this argument. It distinguished the provisions of Section 271(1)(a) from those of Sections 271(1)(c) and 273(1)(a), 273(1)(b), and 273(1)(c), noting that Section 271(1)(a) contemplates a single default-filing the return late. The AO's recording of initiation of penalty proceedings in the assessment order followed by a notice under Section 271(1)(a) was deemed sufficient compliance with the Act. The Tribunal rejected the ground of appeal related to the legality of the penalty order.

2. Justification for the Delay in Filing the Return of Income:
The assessee argued that the delay was justified as the AO had accepted applications under Section 146 twice, indicating sufficient cause for the delay. The Tribunal found no force in this argument, noting that Section 146 does not refer to notices issued under Section 148. The Tribunal also observed inconsistencies in the assessee's claims and a lack of evidence to support the contention that a letter was filed to treat the original return as a response to the Section 148 notice. The Tribunal concluded that the assessee had been non-cooperative and negligent, resulting in assessments under Section 144 twice. This ground of appeal was also rejected.

3. Proper Service of Notice under Section 274:
The assessee claimed that the penalty was imposed without proper service of notice, as required under Section 274. The Tribunal found this argument unconvincing. The penalty order indicated that notices were served by affixture after attempts to serve them through normal means failed. The AO had contacted the assessee's counsel, who did not provide the assessee's address. The Tribunal held that the AO was justified in serving notice by affixture and was not required to record the statement of the notice server. This ground of appeal was rejected.

4. Opportunity to be Heard Before Imposing the Penalty:
The assessee argued that the penalty was imposed without allowing a proper opportunity to be heard. The Tribunal found this argument without merit. The penalty order showed that multiple notices were issued and served by affixture, but the assessee did not respond. The Tribunal emphasized that the purpose of allowing an opportunity is to enable the assessee to explain the delay, which the assessee failed to do. The Tribunal noted that the delay of 56 months in filing the return was not explained, and no reasons for the delay were provided. This ground of appeal was also rejected.

Conclusion:
The Tribunal upheld the order of the CIT(A) sustaining the penalty of Rs. 2,48,708 under Section 271(1)(a) of the Income Tax Act, 1961. The appeal filed by the assessee was dismissed.