2019 (10) TMI 721 - AT - Income Tax

Penalty u/s 271(1)(b) - Non compliance of notice under section 142(1) - HELD THAT - When the AO has sought the information as in the query letter attached to the notice under section 142(1) dated 07.08.2015 and same was repeated in the subsequent occasions, then it will constitute only one default and not five defaults as the information sought by the AO is the same and non compliance by the assessee to furnish the said information would amount to one default. Accordingly, following the order of the Delhi Benches of the Tribunal in case of Smt. Rekha Rani vs. DCIT 2015 (5) TMI 1100 - ITAT DELHI it will constitute only one default, hence, the penalty levied by the AO for five defaults is restricted to one default and the balance amount of ₹ 40,000/- is deleted. As regards the other pleas raised by the assessee, it is manifest from the record that the AO has clearly mentioned in the assessment order the default/non-compliance to the notice issued under section 142(1) and further in reply to show cause notice, the assessee has not taken this plea that it has not received the notice issued under section 142(1). As regards the reasonable and bonafide explanation, once the AO has sent the notice five times which means 1st notice and 4 reminders and all of these notices remained non-complied by the assessee, then this plea of bonafide and reasonable explanation cannot be accepted.

Summary

Issues:
Penalty under section 271(1)(b) for non-compliance with notices under section 142(1) - Whether multiple penalties justified for repeated non-compliance or restricted to a single default.

Analysis:
The judgment by the Appellate Tribunal ITAT Jaipur dealt with five appeals by the assessee challenging penalty orders under section 271(1)(b) of the IT Act for the assessment year 2013-14. The AO initiated penalty proceedings due to non-compliance with notices under section 142(1). The assessee contended that the show cause notices were vague and did not specify the default, denying them the opportunity to respond adequately. The assessee also argued that the notices were not received, attributing non-compliance to staff being out of station. The assessee further claimed that the AO issued multiple penalties for a single default, citing a Tribunal decision to support their position.

The Tribunal considered the submissions of both parties and examined the facts. It noted that the AO issued five notices under section 142(1) on different dates due to non-compliance with the initial notice. However, the information sought in all notices was the same. Relying on a Delhi Tribunal decision, the Tribunal held that multiple penalties for the same default were not justified. It restricted the penalty to a single default, deleting the excess penalties imposed by the AO. The Tribunal emphasized that the penalty provision is deterrent in nature and not for repeated penalties for the same default.

Regarding the argument of non-receipt of notices, the Tribunal observed that the assessee did not raise this issue before the AO but only after the penalty order was passed. The Tribunal rejected the plea of reasonable and bonafide explanation, as the notices were sent multiple times, and all remained non-complied with. Consequently, the appeal in one case was dismissed, while appeals in the other cases were allowed.

In conclusion, the judgment clarified that in cases of repeated non-compliance with identical notices, penalties should be restricted to a single default. The decision underscored the importance of clear communication in notice issuance and emphasized the deterrent nature of penalty provisions.