2022 (2) TMI 918 - AT - Income Tax

Levy of penalty u/s 271F - non-furnishing of the return of income u/s. 139(1) - assessee s case is of a reasonable belief that his income for the year was below the maximum amount not chargeable to tax, so that there was in effect no violation of s.139(1) - HELD THAT - The assessee had been filing income-tax returns, as stated, since 2012 (i.e., for AY 2012-13, and onwards), so that he cannot be unaware of the procedure for filing the same. Even if therefore no return was filed u/s. 139(1) because of low income not shown, implying of the assessee being aware of the provisions of law qua the obligation to file the return of income, he surely ought to have returned, at whatever income, in response to the notice u/s. 148(1). No tax consultant could be expected to advise his client to ignore the said notice. Shri Usrethe, on being so questioned by the Bench during hearing, would respond by submitting that the penalty u/s. 271F has not been levied for non-furnishing the return u/s. 148(1), but that u/s. 139(1). Sure, penalty u/s. 271F is only qua the non-discharge of the obligation u/s. 139(1), but section 148(1) is a para materia provision, casting, like-wise, an obligation to file the return of income, which is rather more compelling inasmuch as in such a case the Revenue has a reason to believe that the assessee s income chargeable to tax has escaped assessment. No wonder, then, that the AO refers to both the incidents while stating his reason for proceeding to issue the show cause notice for penalty u/s. 271F. The same is an allied and, to my mind, an important factor inasmuch as it is indicative of the assessee s conduct, which is, thus, of a conscious disregard of his statutory obligation/s. Bona fides , both of the assessee s explanation and conduct, is a prerequisite to save penalty. A compliance of the notice u/s. 148(1), furnishing a return of income, even if below the taxable limit, would have at once established the assessee s bona fides . Therefore, for the stated reasons, find the levy of impugned penalty as valid in law. Penalty u/s 271(1)(b) - non-compliance of notices u/s. 142(1) - in the assessee s words, blind faith in his local consultant who, for reasons best known to him, did not represent the assessee, as agreed to - HELD THAT - As per the assessee, the consultant (unnamed) assured proper representation subsequent to the receipt of the assessment order on 11/12/2017. However, as afore-stated, there has been no representation before the AO in both the penalty proceedings, constraining him to levy the penalty/s and, in fact, even the filing of the first appeals has been with a delay of nearly 600 days There has been no explanation as to why the consultant, after being apologetic of his consent, continued to behave in such an irresponsible manner, amounting to gross professional misconduct, which cannot be lightly inferred. The other reason stated for the inordinate delay in filing the appeals is the non-connectivity with the Revenue's e-portal, which could at best explain the delay by a few days. Under the circumstances, find no merit in the assessee's case qua penalty u/s. 271(1)(b) as well. Assessee appeal dismissed.

Summary

Issues:
Appeals against orders confirming penalty under section 271F and section 271(1)(b) of the Income Tax Act, 1961 for Assessment Year 2010-11.

Detailed Analysis:

Issue 1: Penalty under section 271F for non-furnishing of return of income:
The appellant argued that his income was below the taxable limit and hence did not file a return. However, the tribunal found discrepancies in cash deposits and withdrawals, indicating possible undisclosed income. The appellant failed to file a return in response to the notice u/s 148(1), showing a conscious disregard of statutory obligations. The tribunal upheld the penalty under section 271F due to the appellant's conduct lacking bona fides and reasonable cause.

Issue 2: Penalty under section 271(1)(b) for non-compliance of notices u/s 142(1):
The appellant blamed his consultant for non-compliance, but the tribunal found the explanation lacking crucial details and evidence. The delay in filing appeals and consultant's unexplained behavior led to the conclusion that the appellant's case lacked merit for penalty under section 271(1)(b). The tribunal emphasized the importance of genuine explanations and proper representation before authorities to avoid penalties.

Case Law Analysis:
The tribunal distinguished the case laws cited by the appellant, highlighting inconsistencies and deficiencies in the appellant's explanations. The tribunal emphasized that reasonable cause is a factual matter and must be demonstrated with transparency and completeness. The tribunal found the appellant's reliance on case laws misplaced due to the lack of credibility in the explanations provided.

In conclusion, the tribunal dismissed both appeals, emphasizing the importance of complying with statutory obligations, providing genuine explanations, and ensuring proper representation before authorities to avoid penalties. The judgment underscores the need for transparency, completeness, and credibility in taxpayer's conduct and explanations to avoid adverse legal consequences.