2014 (3) TMI 538 - AT - Income Tax

Appeal successful: Penalty set aside for non-compliance with notice.

Tanvir Finance & Leasing Ltd., now known as Harnoor Marketing Ltd. Versus ACIT Central Circle 21, New Delhi

The Appellate Tribunal allowed the appeal, setting aside the penalty imposed on the appellant under section 271(1)(b) for non-compliance with a notice ... Penalty u/s 271(1)(b) of the Act – failure to comply with the statutory notice u/s 142(1) - assessee sought the adjournment of the case to January/ February 2011 but AO refused to grant adjournment - Held that:- The AO was wrong in assuming that the assessment for the Assessment Year 2009-10 was getting time barred on 31.12.2010 and on that mistaken belief he has proceeded to estimate the income of the assessee u/s 144 of the Act - the reason given by the Assessing Officer not to give adjournment was clearly on an erroneous basis - AR of the assessee could not represent before the Assessing Officer on 10.11.2010, since he was pre-occupied with matters getting time barred - there was reasonable cause for the assessee not to have attended before the AO on 10.11.2010 – thus, the order of the CIT(A) set aside – Decided in favour of Assessee. Issues:Appeal against penalty order u/s 271(1)(b) for non-compliance with notice u/s 142(1) - Allegation of illegal, bad in law, without jurisdiction, time-barred, and wrong on facts - Violation of principles of natural justice - Imposition of penalty of Rs. 10,000 - Failure to attend before Assessing Officer - Request for adjournment - Justifiability of penalty - Misdirection by Assessing Officer - Violation of law - Reasonable cause for non-appearance.Analysis:Issue 1: Allegation of illegal penalty order u/s 271(1)(b):The appellant challenged the penalty order imposed by the Assessing Officer u/s 271(1)(b) for non-compliance with the notice u/s 142(1) for the Assessment Year 2009-10. The appellant contended that the penalty was illegal, bad in law, without jurisdiction, time-barred, and wrong on facts. The grounds of appeal highlighted the failure of the ld CIT(A) to appreciate the legal aspects and circumstances of the case.Issue 2: Violation of principles of natural justice:The appellant argued that the penalty order was against the principles of natural justice and humanity as it was passed without affording a reasonable opportunity of being heard. The appellant contended that the penalty was imposed without considering the justifiable reasons for non-compliance with the notice u/s 142(1) and that there was a lack of proper communication and understanding between the appellant and the Assessing Officer.Issue 3: Request for adjournment and justifiability of penalty:The appellant's representative sought an adjournment for the assessment proceedings to January/February 2011, citing preoccupation with other cases. The Assessing Officer, however, proceeded with the assessment assuming the case was getting time-barred. The appellant argued that the request for adjournment was reasonable and that there was a justifiable cause for non-appearance before the Assessing Officer on the specified date. The appellant contended that the penalty was unjustified and should be set aside.Issue 4: Misdirection by Assessing Officer and violation of law:The Assessing Officer's misdirection in assuming the assessment was getting time-barred led to the erroneous imposition of the penalty. The appellant's argument focused on the incorrect assumptions made by the Assessing Officer, leading to a violation of law and principles of natural justice. The appellant highlighted the procedural errors and lack of proper consideration by the Assessing Officer in dealing with the appellant's request for adjournment.Issue 5: Reasonable cause for non-appearance:The appellant emphasized that there was a reasonable cause for the non-appearance before the Assessing Officer, as the representative was preoccupied with other cases that were time-barred. The appellant argued that the penalty was unjustified, considering the circumstances and the lack of proper communication and understanding between the parties involved.In conclusion, the Appellate Tribunal allowed the appeal, setting aside the penalty imposed on the appellant. The Tribunal found that the Assessing Officer's actions were based on erroneous assumptions and misdirection, leading to a violation of principles of natural justice and a lack of proper consideration of the appellant's justifiable reasons for non-compliance. The decision highlighted the importance of procedural fairness and reasonable cause in penalty proceedings under the Income Tax Act, 1961.