2024 (12) TMI 251 - AT - Income Tax

Penalty u/s. 271(1)(b) - failure to comply with the notice u/s 142(1) - HELD THAT - Every non-compliance to notice u/s 142(1) give a separate cause of action for levying penalty u/s 271(1)(b) and there has to be a specific initiation and issuance of notice u/s 271(1)(b) for each non compliance and the assessee is to be put to notice for the same. Thus initiating penalty proceedings u/s 271(1)(b) for non compliance to notice u/s 142(1) and levying penalty u/s 271(1)(b) for non compliance to notice u/s 142(1) is itself not correct. AO issued only one notice u/s 271(1)(b) which the assessee has claimed that it was never received by him and the AO imposed penalty ex-parte u/s 271(1)(b) vide penalty order and hence principles of natural justice are clearly breached and the assessee is condemned un-heard by the AO. It is observed that the ld. CIT(A) did not verify the contentions and explanations submitted by the assessee wrt to non compliances to the notices issued u/s 271(1)(b) and the appeal of the assessee was dismissed by ld. CIT(A). CIT(A) did not even called for assessment records nor called for records from the AO wrt penalty levied u/s 271(1)(b) and dismissed the appeal of the assessee without verifying the contentions and explanations of the assessee. CIT(A) did not specify as to non-compliance of which of the notices u/s 142(1) the ld. CIT(A) is upholding the penalty. It is well settled that power of CIT(A) are co-terminus with the powers of the AO. As assessee has given reasonable explanation for not attending the hearing before the AO and keeping in view the provisions of section 273B read with section 271(1)(b) of the Act accept the contentions of the assessee and delete penalty.

Summary

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Legitimacy of the penalty imposed under Section 271(1)(b) of the Income-tax Act, 1961.
3. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appeal was filed 24 days late by the assessee before the Income-tax Appellate Tribunal (ITAT), Agra, beyond the time prescribed under Section 253(3) of the Income-tax Act, 1961. The assessee claimed that the appellate order was not physically received and was sent via email, which landed in the spam/junk folder, and was discovered only when accessing the portal for other purposes. The Tribunal observed that the transition to electronic communication in tax proceedings could lead to such issues and emphasized a liberal approach towards condonation of delay to advance substantial justice. The Tribunal found no mala fide intent on the part of the assessee and noted that the assessee was vigilant in other proceedings. Thus, the delay was condoned, allowing the appeal to be decided on merits.

2. Legitimacy of the Penalty Imposed Under Section 271(1)(b):

The penalty was imposed due to non-compliance with notices under Section 142(1) dated 04.10.2017 and 03.11.2017 during reassessment proceedings. The assessee argued that non-compliance on 25.10.2017 was due to a strike by the Taxation Bar Association, Agra, and on 13.11.2017, the authorized representative was out of town for professional duties. The assessee claimed to have sought adjournment on 13.11.2017, which was allegedly not accepted by the Assessing Officer (AO). The Tribunal noted that the penalty proceedings were initiated for non-compliance with the notice dated 04.10.2017, but the penalty was levied for non-compliance with both notices, which was procedurally incorrect. The Tribunal also highlighted the need for specific initiation and notice for each non-compliance, which was not adhered to by the AO. Given the reasonable explanations provided by the assessee and the procedural lapses, the Tribunal deleted the penalty of Rs. 10,000/- imposed under Section 271(1)(b).

3. Compliance with Principles of Natural Justice:

The Tribunal observed that the principles of natural justice were breached as the penalty was imposed ex-parte without proper notice to the assessee. The AO did not issue further notices after the initial one dated 14.11.2017, which the assessee claimed was never received. Moreover, the CIT(A) did not verify the contentions and explanations of the assessee and dismissed the appeal without adequate examination of records or calling for assessment records. The Tribunal emphasized that the CIT(A)'s powers are co-terminus with those of the AO, and failure to adhere to procedural fairness warranted the deletion of the penalty.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, condoning the delay and deleting the penalty imposed under Section 271(1)(b) due to procedural lapses and reasonable explanations provided by the assessee. The decision underscored the importance of procedural fairness and adherence to principles of natural justice in tax proceedings.