2019 (3) TMI 387 - AT - Income Tax

Levy of penalty u/s 271(1)(b) - non comply with the notice issued u/s 142(1) - as contended that the assessee duly filed reply to the said notice u/s 142(1) as issued by AO - HELD THAT - The contention of the assessee is found to be correct. Copy of assessee s reply dated 28/10/2016 to the notice dated 19/10/2016 issued to the assessee under section 142(1) produced. The first page of this reply (APB 14), a scanned copy whereof is reproduced as bears the stamp of the Assessing Officer and signatures thereon. These are dated 21/12/2016. The Department has not been able to show otherwise. Therefore, it cannot be said that the assessee did not comply with the notice dated 19/10/2016 issued under section 142(1) of the Act. Thus as the assessee has duly complied with the notice, penalty under consideration is entire uncalled for. It is, accordingly, cancelled. - Decided in favour of assessee.

Summary

Issues:
Appeal against orders of CIT(A) for assessment years 2009-10 to 2015-16, Penalty under section 271(1)(b) for non-compliance with notice under section 142(1) of the Income-tax Act, 1961, Compliance with notice dated 19/10/2016, Validity of penalty order, Consideration of surrounding facts and circumstances, Violation of provision of section 274 of the Act.

Analysis:
The appeals were filed by the assessee against the orders of the ld. CIT(A) for various assessment years. The grounds raised were identical across all cases, leading to a common order for disposal. The main issue revolved around the levy of penalty under section 271(1)(b) for alleged non-compliance with a notice under section 142(1) of the Income-tax Act, 1961. The assessee contended that compliance had been made by filing a reply to the said notice, which was dated 19/10/2016. The reply submitted by the assessee was found to be in order, as it bore the stamp and signatures of the Assessing Officer. The department failed to provide any evidence to the contrary.

The provisions of section 271(1)(b) are triggered only in case of failure to comply with notices under section 142(1) of the Act. Since the assessee had duly complied with the notice dated 19/10/2016, the penalty was deemed unnecessary and uncalled for. Therefore, the penalty levied was canceled, and all seven appeals filed by the assessee were allowed. The judgment highlighted the importance of actual compliance with statutory notices to avoid penalties under the Income-tax Act, 1961.

The judgment emphasized that the penalty order should consider the surrounding facts and circumstances of the case. It was crucial for the authorities to take into account all relevant aspects before levying penalties to ensure fairness and adherence to the legal provisions. The decision underscored the necessity of following due process and providing justifications for penalty imposition based on valid grounds supported by factual evidence.

Furthermore, the judgment pointed out that any order levying penalty must adhere to the provisions of the Act, specifically section 274. Violation of statutory provisions could render the penalty order invalid and subject to being quashed. The court's meticulous review of the compliance with statutory requirements and the legal framework governing penalty imposition set a precedent for ensuring the proper application of tax laws and safeguarding the rights of taxpayers.