2017 (11) TMI 792 - AT - Income Tax

Penalty u/s 271(1)(c) - failure on the part of the assesses to attend the assessment proceedings - proof of reasonable cause - main plea for reasonable cause pleaded by the assessee/s has been that the key person/group head, Shri Gopal Kumar Goyal who was entrusted with the 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 - Held that - From a perusal of section 273B, we can understand that, notwithstanding anything contained in the provisions of clause (b) of Sub-section (1) of section 271, no penalty shall be imposed on the person or the assessee as the case may be, for any failure referred to in the said provision, if he proves that there was reasonable cause for the said failure. So it can be understood that penalty cannot be imposed, if the assessee is able to prove that there was reasonable cause for the said failure of not complying with the notice served on them under sub-section (1) of section 142 of the Act. The facts submitted by assessee for reasonable cause have not been controverted by the AO or the Ld. CIT (Appeals). All these facts and circumstances, under any prudence, do 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 as highlighted by the assessee/s not only during the course of the assessment proceedings but also before the Assessing Officer and the Learned CIT(Appeals) in the impugned penalty proceedings and hence penalty cannot be levied in such circumstances. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty imposed under section 271(1)(b) of the Income Tax Act, 1961.
2. Reasonableness of cause for non-compliance with statutory notices.

Issue-Wise Detailed Analysis:

1. Confirmation of Penalty Imposed under Section 271(1)(b) of the Income Tax Act, 1961:

The appeals were filed by three assessees challenging the confirmation of penalty under section 271(1)(b) of the Income Tax Act, 1961. The penalties were imposed due to the assessees' failure to attend assessment proceedings as required by various notices issued by the Assessing Officer (AO). Despite filing submissions, the assessees did not attend the proceedings. The AO imposed penalties as follows:

- Shivganesh Buildcon (P) Ltd: ?20,000/- for AY 2007-08 and 2008-09.
- Shivanandan Buildcon (P) Ltd: ?20,000/- for AY 2007-08 and 2008-09.
- Nageshwar Builder (P) Ltd: ?20,000/- for AY 2005-06, 2007-08, and 2008-09.

The Ld. CIT (A) confirmed the penalties, rejecting the reasons provided by the assessees for non-compliance, such as search operations, detention of a key person, and heavy workload due to multiple pending assessments. The Ld. CIT (A) emphasized that these reasons did not constitute a "reasonable cause" for non-compliance with statutory notices.

2. Reasonableness of Cause for Non-Compliance with Statutory Notices:

The assessees argued that their non-compliance was due to the detention of Shri Gopal Kumar Goyal, the group head, who was responsible for income tax matters and was in judicial custody. The entire group and family members were engaged in court proceedings for his release, and there was a significant turnover of employees. The ITAT considered the definition of "reasonable cause" as per legal precedents, including the cases of Woodward Governor India P. Ltd. vs. CIT and Ors. and Azadi Bachao Andolan v. Union of India.

The ITAT noted that "reasonable cause" refers to a situation that would constrain a person of average intelligence and ordinary prudence. The facts presented by the assessees, including the judicial custody of the key person and the engagement of the group in court proceedings, were not disputed by the AO or the Ld. CIT (A). The ITAT concluded that these circumstances did constitute a reasonable cause under section 273B of the Act, which provides that no penalty shall be imposed if the assessee proves there was a reasonable cause for the failure.

Conclusion:

The ITAT held that the failure to comply with certain notices on specific dates was due to a reasonable cause, as highlighted by the assessees. Consequently, the penalties under section 271(1)(b) were directed to be deleted for all the assessment years in question for all three assessees. The appeals were allowed, and the order was pronounced in the Open Court on 31st August 2017.