2015 (12) TMI 185 - AT - Income Tax

Penalty under section 272A (1) (c) - non-compliance of the notice u/s 131 - Held that - Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty where there is a technical or venial breach of the provisions of the taxing statute. In the present case, when the assessee is able to establish that the account books were produced during assessment proceedings, however with some delay, then it is a technical/venial breach of the provisions of the Act and penalty cannot be held as correct and justified. It is also relevant to note that undisputedly Shri Mahendra Nahata, Chairman of the appellant company in his statement recorded on 13.12.2007 stated that The company keeps back up data, which will be compiled to prepare the accounts for the years for which the department is unable to a access the accounts in the server. This also shows cooperation and obedience on the part of the assessee company. Hence, penalty can be imposed upon the assessee on the allegation of non-compliance of the notice u/s 131 of the Act and the Assessing Officer was not correct in passing penalty order imposing penalty of ₹ 10,000 u/s 272A(1)(c) of the Act. In this situation, we are inclined to hold that the CIT(A) was not justified in confirming the penalty and hence impugned first appellate order cannot be held as sustainable and thus we demolish the same. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty under section 272A(1)(c) of the Income Tax Act, 1961.
2. Allegations of conscious avoidance by the assessee to produce books of accounts.
3. Compliance with notices of the DCIT and imposition of penalty.

Analysis:

Issue 1: Confirmation of penalty under section 272A(1)(c) of the Income Tax Act, 1961:
The appeal was directed against the order of the CIT(A)-XXXIII confirming the penalty of Rs. 10,000 imposed under section 272A(1)(c) of the Act. The Assessing Officer held that the assessee intentionally failed to respond to the summons under section 131 of the Act, indicating conscious avoidance. The CIT(A) upheld the penalty, stating that the appellant failed to produce account books before the Investigation Wing despite repeated opportunities. The penalty was confirmed based on the intentional non-compliance by the assessee.

Issue 2: Allegations of conscious avoidance by the assessee to produce books of accounts:
The main contention of the appellant was that they did cooperate during assessment proceedings and produced account books before the DCIT. The appellant argued that the delay in submitting account books did not cause any prejudice to the revenue and should not warrant a penalty. The ITAT observed that the Assessing Officer's allegation of non-compliance was not sustainable as the account books were submitted during assessment proceedings. The delay was attributed to reasons beyond the assessee's control, and it was considered a technical breach rather than intentional avoidance.

Issue 3: Compliance with notices of the DCIT and imposition of penalty:
The ITAT noted that the Chairman of the appellant company had stated that backup data was kept to compile accounts for years when the department could not access the server. This demonstrated cooperation on the part of the assessee. The ITAT held that the penalty imposed by the Assessing Officer was not justified as the account books were eventually produced during assessment proceedings. Consequently, the ITAT allowed the appeal, directing the deletion of the penalty.

In conclusion, the ITAT ruled in favor of the appellant, highlighting that the penalty under section 272A(1)(c) was not warranted due to the technical breach in complying with notices, which was beyond the assessee's control. The decision emphasized the importance of cooperation and timely submission of relevant documents during assessment proceedings to avoid penalties under the Income Tax Act, 1961.