2019 (8) TMI 156 - AT - Income Tax

Levy of penalty u/s 271(1)(b) - failure to comply with notices u/s 142(1)/143(2) - notices to the assessee at the old address - HELD THAT - Prior to completion of the assessment for assessment year under appeal, assessee had already reported new address to the Revenue Department. However, the AO for the reasons best known to him have sent the notices to the assessee at the old address. No attempt has been made to serve assessee at the new address. Therefore, there could not be any reason to believe that assessee had defaulted in making compliance to the notices. CIT(A) noted that on 05.09.2007 Counsel for assessee appeared before AO but no new address has been intimated. However, in the Income tax return filed for subsequent AY 2006-07, assessee had already reported new address to the Department. There is thus, no default on the part of the assessee to comply with the notices u/s 142(1)/143(2) of the Act. Further, AO has recorded several dates on which notices have been issued to the assessee, but it is not mentioned in the penalty order as to for which default of notice penalty has been levied. In the absence of any specific charge against the assessee, it is difficult to accept that assessee would default to make any reply before the authorities below. The quantum matter is pending before the CIT(A) as per directions of the Tribunal. Considering all assessee had a reasonable cause for failure to comply with the notices. Therefore, penalty is not leviable in the matter. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s 271(1)(b) of the Act for failure to comply with notices u/s 142(1)/143(2) of the Act.

Analysis:

Issue 1: Compliance with Notices
The AO noted that the assessee company failed to furnish details/information/explanation in response to multiple notices, leading to the levy of penalty u/s 271(1)(b) of the Act. The assessee argued that a change in address was reported for the subsequent assessment year, and no notice was served at the new address. However, the CIT(A) dismissed the appeal, stating that the record showed the assessee had multiple addresses and that the change of address should have been communicated to the AO. The assessee contended that the penalty order mentioned the old address despite the new address being reported in the income tax return for the subsequent year. The Tribunal found that the assessee had indeed reported the new address to the Revenue Department before the assessment was completed, and no attempts were made to serve notices at the new address. The Tribunal concluded that there was no default on the part of the assessee to comply with the notices u/s 142(1)/143(2) of the Act.

Issue 2: Specificity of Charges
The AO issued notices to the assessee at the old address without mentioning the specific default for which the penalty was levied. The Tribunal noted that the penalty order did not specify the default for which the penalty was imposed, making it difficult to determine the alleged non-compliance by the assessee. The Tribunal highlighted that the quantum matter was still pending before the CIT(A) as per the Tribunal's directions, further emphasizing the lack of specific charges against the assessee in the penalty order.

Decision and Conclusion
Considering the facts and circumstances, the Tribunal found that the assessee had a reasonable cause for the failure to comply with the notices. Therefore, the Tribunal set aside the orders of the authorities below and canceled the penalty, ruling in favor of the assessee. The appeal of the assessee was allowed, and the penalty was deemed not leviable in the matter.