2017 (9) TMI 38 - AT - Income Tax

Proceedings u/s 153A initiated and assessment completed - Penalty proceedings initiated u/s 271(1)(b) during assessment - Non-compliance of statutory notices by assessee - Filing of reasonable cause for such Non Compliance - venial breach - Held that - The assessee is mainly aggrieved by the levy of penalty of ₹ 20,000/- u/s 271(1)(b) for all the impugned assessment years, which was on account of failure to comply with the 2 statutory notices/date fixed for hearing on 30.11.2012 and 27.12.2012. The assessee filed very detailed explanation, challenging the validity of initiation of penalty proceedings and explaining the reasonable cause for non-compliance on the appointed days firstly, the key person/group head, Shri Gopal Kumar Goyal who was entrusted with income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release and various employees were leaving the group further accentuating the problems; secondly, more than 300 group assessments were initiated in the wake of search proceedings which were simultaneously going on, therefore, it was difficult to comply to the various notices on short dates; lastly, it has been strongly pleaded before us, that the compliances had been made through replies filed through dak or registered post though belatedly. These facts have not been controverted by the AO or CIT (Appeals). Thus all it constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause. Also demand in the quantum proceedings has been reduced to nil , after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(b) for non-compliance with statutory notices.

Analysis:
The appeals were filed against a common order related to penalty proceedings for the assessment years 2006-07 to 2008-09. The key issue was the levy of a penalty of ?20,000 under section 271(1)(b) due to failure to comply with statutory notices. The assessee, a real estate company, challenged the penalty, citing reasons such as vague penalty notice, compliance through replies filed via dak or registered post, difficulties in managing multiple assessments, and the detention of a key person involved in tax matters. The Assessing Officer and the CIT (Appeals) upheld the penalty, emphasizing the lack of reasonable cause for non-compliance with the notices.

The tribunal analyzed the case, noting the importance of specific and unambiguous penalty notices. It observed that while the assessee did not attend proceedings on certain dates, replies were filed during the assessment proceedings. The tribunal considered the reasons provided by the assessee, including the detention of the key person and the challenges faced due to ongoing court proceedings. It found that the assessee had made efforts to comply through replies sent via dak or registered post. The tribunal concluded that the reasons presented by the assessee constituted a reasonable cause for the delay in compliance, and the penalty was unjustified.

Moreover, the tribunal highlighted that the demand in the quantum proceedings had been reduced to nil, indicating technical and venial non-compliance. Therefore, it ruled in favor of the assessee, directing the deletion of the penalty for all the assessment years. The tribunal's decision applied uniformly to all the years under consideration, leading to the allowance of the appeals and the deletion of the penalties imposed under section 271(1)(b).

In conclusion, the tribunal found that the assessee had provided valid reasons for the delay in compliance with statutory notices, leading to the deletion of the penalties imposed. The decision emphasized the importance of considering reasonable causes for non-compliance and ensuring that penalty notices are specific and clear to enable proper rebuttal by the assessee.