2024 (4) TMI 493 - AT - Income Tax

Penalty u/s 271(1)(b) imposed on minor - Clubbing of minor's income in parents hands - penalty imposed on Non-compliance of two notices issued by AO u/s 142(1) - assessee argued that assessee under consideration is a minor and assessment order was framed on the minor person without the consent of his guardian, which is not sustained in law, hence penalty sustained by ld CIT(A) is not sustainable in the hands of minor because minor does not have capacity to make contract. HELD THAT - We note that ld Counsel for the assessee argued that assessee under consideration is a minor and assessment order was framed on the minor person without the consent of his guardian, which is not sustained in law, hence penalty sustained by ld CIT(A) is not sustainable in the hands of minor because minor does not have capacity to make contract. The minor s income is clubbed in the hands of one of the parents, therefore considering these facts, we note that penalty should not be imposed on the minor-assessee. We note that during the assessment proceedings, assessee submitted all the necessary details and complied with all the notices issued by the AO from time to time. Regarding the non-compliance of notice of hearing requiring appellant to attend/furnish details appellant filed letter for adjournment. The non-compliance was due to Covid-19 pandemic, as the assessee was working with proper safety measures. Besides, it is also an admitted fact that no addition was made by the assessing officer in the quantum proceedings. That is, in the assessment order, the assessing officer did not make any addition in the hands of the assessee, therefore, there is no question to impose the penalty on the assessee and hence we delete the remaining penalty - Appeal filed by the assessee is allowed.

Summary

Issues Involved:
The appeal pertains to the penalty order passed u/s 271(1)(b) of the Income Tax Act, 1961 for Assessment Year 2013-14. The issues include the condonation of delay in filing the appeal and the imposition of penalty on the minor-assessee for non-compliance of notices u/s 142(1) of the Act.

Condonation of Delay:
The appeal filed by the assessee was delayed by 70 days, leading to a petition for condonation of delay. The assessee cited lack of knowledge about income tax proceedings and the order being mixed up with other notices as reasons for the delay. The Tribunal found the reasons convincing and constituting a reasonable cause for the delay, thus condoning it and admitting the appeal for hearing.

Imposition of Penalty on Minor-Assessee:
The assessing officer levied a penalty of Rs. 20,000 u/s 271(1)(b) for non-compliance of notices issued under section 142(1) of the Act. However, the ld CIT(A) reduced the penalty to Rs. 10,000, considering the bona-fide reasons provided by the assessee. The appeal before the Tribunal challenged the remaining penalty amount.

Arguments and Decision:
The counsel for the assessee argued that being a minor, the assessee lacked the capacity to enter into contracts, thus challenging the validity of the penalty proceedings. Additionally, since no additions were made by the assessing officer in the quantum proceedings, the imposition of the penalty was deemed unwarranted. The Tribunal agreed with the assessee, noting that the minor's income is clubbed with a parent and the penalty should not apply to the minor. It was observed that the non-compliance with notices was due to the Covid-19 pandemic, and since no additions were made in the assessment order, the remaining penalty of Rs. 10,000 was deleted.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, pronouncing the order in the open court on 08/04/2024.