2018 (3) TMI 1411 - HC - Income Tax

Penalty u/s 271(1)(b)- assessee refused to answer the notice under Section 142(1) - accounts held in HSBC Bank - assessee was an attorney of some account holder - Held that - The material on the record indicates that the French official source shared information with the Indian Government with respect to accounts held in HSBC Bank. Prima facie, such material disclosed that the assessee was an attorney of some account holder. In the Court s opinion, if the assessee really had no connection with such accounts, no prejudice could really have ensued to him if he would have complied with the notice under Section 142(1) of the Act and filed the consent form. In these circumstances, the penalty cannot be held to be erroneous or unwarranted. No question of law arises

Summary

Issues:
1. Non-compliance of notice under Section 142(1) of the Income Tax Act, 1961.
2. Imposition of penalty under Section 271(1)(b) of the Act.
3. Dispute regarding the consent-cum-waiver form and the assessee's connection with Swiss Bank accounts.
4. Justification of the Revenue authorities' actions.
5. Consideration of material shared by French official source and its impact on the penalty imposition.

Analysis:
1. The appellant challenged the ITAT's order upholding the findings of non-compliance with the notice under Section 142(1) of the Income Tax Act, 1961, and the subsequent penalty under Section 271(1)(b) of the Act. The appellant contended that the lower authorities' findings were against the law, emphasizing the need for credible material to compel the assessee to respond to the notice and submit the consent form.

2. The dispute arose from the notice served on the assessee to cooperate and fill a consent-cum-waiver form related to Swiss Bank accounts. The Revenue relied on documents suggesting the assessee's association with a Swiss Bank account, which the assessee denied. The AO and appellate authorities, including the ITAT, deemed the refusal to answer the notice and submit the form as non-compliance justifying the penalty under Section 271(1)(b) of the Act.

3. The appellant argued that the Revenue's actions were unjustified, emphasizing the lack of incriminating material seized during the search to support penal consequences. The appellant asserted that without credible information necessitating further investigation into the assessee's involvement, compelling a response to the notice and form was unwarranted.

4. The High Court reviewed the submissions and the material indicating the assessee's connection with accounts held in HSBC Bank, shared by a French official source. The Court observed that if the assessee had no actual association with the accounts, complying with the notice and form would not have caused any prejudice. Consequently, the Court found the penalty imposition justified, dismissing the appeals as no legal issue arose from the circumstances.

In conclusion, the High Court upheld the penalty imposed on the assessee for non-compliance with the notice under Section 142(1) of the Income Tax Act, 1961, based on the material suggesting the assessee's connection with Swiss Bank accounts. The judgment emphasized the importance of responding to such notices and forms in the absence of prejudice to the assessee, highlighting the need for cooperation in tax investigations.