2018 (1) TMI 1109 - AT - Income Tax

Penalty u/s. 271(1)(b) - non compliance with the statutory notices - Held that - Failure to comply with certain notices on a particular date was due to reasonable cause as highlighted by the assessee not only during the course of the assessment proceedings but also before the Assessing Officer and Learned CIT(Appeals) in the impugned penalty proceedings and hence penalty cannot be levied in such circumstances. See M/s. Witness Builders Pvt. Ltd. vs. DCIT & Others 2017 (9) TMI 313 - ITAT DELHI - Decided in favour of assessee

Summary

Issues Involved:
1. Sustenance of penalties imposed under section 271(1)(b) of the IT Act, 1961 for non-compliance with statutory notices.
2. Justification of penalties in light of earlier ITAT decisions in similar cases.
3. Validity of penalty notices and reasonable cause for non-compliance.

Issue-wise Detailed Analysis:

1. Sustenance of Penalties Imposed Under Section 271(1)(b) of the IT Act, 1961:
The primary issue in these appeals is the challenge against the penalties of ?20,000 each imposed under section 271(1)(b) of the IT Act, 1961 due to non-compliance with statutory notices. The penalties were affirmed by the CIT(A)-XXVI, New Delhi.

2. Justification of Penalties in Light of Earlier ITAT Decisions in Similar Cases:
The appellants argued that similar penalties in other group cases were deleted by the ITAT, Delhi Benches under identical facts and circumstances. They referred to the case of M/s. Witness Builders Pvt. Ltd. vs. DCIT & Others, where the penalties were deleted based on the same grounds. The ITAT, after considering the rival submissions and the material on record, found that the issue of penalty under section 271(1)(b) had already been decided in favor of the assessee in other group cases, such as Jwala Prasad Aggarwal vs. DCIT. The ITAT noted that the penalties were canceled in those cases due to similar arguments and facts.

3. Validity of Penalty Notices and Reasonable Cause for Non-Compliance:
The ITAT examined the reasons for non-compliance provided by the assessees, such as the detention of the main controlling person, Shri Gopal Kumar Goyal, in judicial custody, and the burden of managing over 300 group assessments within a short span. The ITAT found the penalty notices to be vague as they did not specify the particular statutory notice or date of non-compliance. The assessees had made compliances through replies filed via dak or registered post, albeit belatedly. The ITAT concluded that there was a reasonable cause for delay in compliance, falling within the scope of section 273B, which provides for penalty relief if a reasonable cause is shown.

The ITAT also noted that the demand in the quantum proceedings had been reduced to "nil," indicating that the non-compliance was technical and venial in nature. Consequently, the penalties under section 271(1)(b) were found to be unsustainable and were directed to be deleted.

Conclusion:
The ITAT, respecting the decisions of the co-ordinate Benches in similar cases and considering the identical facts and circumstances, canceled the penalties imposed under section 271(1)(b) of the IT Act, 1961. The appeals of the assessees were allowed, and the penalties were deleted. The order was pronounced in the open court on 22nd January 2018.