2012 (6) TMI 10 - AT - Income Tax

Penalty under section 271(1)(b) of the Income-tax Act - fault for non-compliance of hearing - assessee stated that notice dated had been sent to the old address and therefore, not received - non-receipt of notice was the reason for the assessees non-appearance Held that - Penalty will not also be imposed merely because it is lawful to do so. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute . orders of the authorities below set aside and delete the levy of penalty. appeals filed by the assessees are allowed.

Summary

Issues:
Levy of penalty under section 271(1)(b) of the Income-tax Act on husband and wife assessees for non-compliance with hearing notices.

Analysis:
The assessees, a husband, and wife, filed income tax returns in 2005, and notices were issued under section 143(2) for hearings in 2006 and 2007. The Assessing Officer imposed a penalty of Rs. 10,000 each under section 271(1)(b) for non-compliance with the hearing notices. The assessees contended that they did not receive the notices as they were sent to their old address. However, the Commissioner of Income-tax (Appeals) rejected this argument, stating that the address on the notices matched the one on the income tax return, and no address change was communicated to the Assessing Officer, upholding the penalty.

The assessees appealed, arguing that the non-receipt of notices was a reasonable cause for their non-appearance, citing section 273B of the Income-tax Act. They highlighted that the first notice was sent to their new address, known to the Assessing Officer. The assessees had shifted to a new address due to medical reasons, informing the post office and neighbors. The Tribunal noted that penalty under section 271(1)(b) is not mandatory if a reasonable cause is proved for non-compliance. The Tribunal found that the non-appearance was due to non-receipt of the notice, considering it a reasonable cause under section 273B, referencing a previous court decision.

Relying on the precedent set by the Supreme Court in Hindustan Steel Ltd. v. State of Orissa, the Tribunal emphasized that penalties should not be imposed for technical or venial breaches, and discretion should be exercised judiciously. Consequently, the Tribunal set aside the lower authorities' orders and revoked the penalty, allowing the appeals filed by the assessees.

In conclusion, the Tribunal found that the non-appearance of the assessees was due to the non-receipt of notices, constituting a reasonable cause under section 273B, and in line with judicial precedent, the penalty under section 271(1)(b) was deemed unwarranted, leading to the allowance of the appeals and the deletion of the penalty levy.