2019 (11) TMI 1754 - AT - Income Tax

Unfairly Imposed Penalty Quashed by ITAT Due to Lack of Opportunity for Taxpayer

Ganesh B Pokhriyal Versus Asst. CIT, Circle 3, Kalyan

The ITAT set aside the CIT(A)'s order upholding a penalty of Rs. 10,000 imposed under Sec. 271(1)(b) of the Income Tax Act, 1961 for A.Y 2014-15, due to ... Penalty u/s 271(1)(b) - assessee had failed to comply with the “SCN' that was issued to him u/s 274 r.w.s 271(1)(b), and had neither appeared before him nor furnished any written submissions - HELD THAT:- Assessee was never intimated about the fate of his letter dated 17.10.2016 (received by the A.O on 19.10.2016), insofar his request for adjourning the penalty proceedings under Sec. 274 r.w.s 271(1)(b) was concerned. In fact, it can safely be held that the assessee had remained divested of a sufficient opportunity of being heard before being saddled with the penalty u/s 271(1)(b). Apart therefrom, we find that subsequently the A.O had passed the assessment order u/s 143(3) and not under Sec. 144. Accordingly, it can safely be concluded that the subsequent compliances/furnishing of information by the assessee were held by the A.O to be good compliances and the defaults committed earlier were ignored by him. As observed by the ITAT, Delhi in the case of (i). Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust [2007 (8) TMI 386 - ITAT DELHI-G] and (ii). Globus Infoco Limited [2016 (6) TMI 1304 - ITAT DELHI] the framing of assessment under Sec. 143(3), though not conclusively, but to some extent would rule out the circumstances justifying imposition of any penalty u/s 271(1)(b). Accordingly, in the backdrop of our aforesaid observations, we are unable to subscribe to the imposition of penalty under Sec. 271(1)(b) by the A.O, and finding the same to be unjustified, quash the same. Appeal of the assessee is allowed. Issues:1. Appeal against penalty order under Sec. 271(1)(b) of the Income Tax Act, 1961 for A.Y 2014-15.Analysis:1. The appellant challenged the penalty order, alleging arbitrariness and violation of natural justice by the Commissioner Income-tax (Appeals) (CIT(A)). The grounds of appeal included failure to appreciate the penalty order's arbitrary nature, lack of consideration for principles of natural justice, and misinterpretation of binding judicial orders by the CIT(A).2. The assessee filed the return of income for A.Y 2014-15, which was selected for scrutiny assessment. The Assessing Officer (A.O) issued notices under Sec. 142(1) and 271(1)(b) due to non-compliance by the assessee. Despite multiple notices, the assessee failed to respond, leading to a penalty of Rs. 10,000 imposed by the A.O under Sec. 271(1)(b) on 24.10.2016.3. The CIT(A) upheld the penalty, noting the assessee's non-cooperation and failure to provide necessary information during assessment proceedings. The CIT(A) observed that the penalty was justified due to the assessee's non-compliance with notices and lack of cooperation, resulting in an addition of Rs. 26,64,699 to the income.4. The appellant contended that the A.O did not consider the adjournment request made by the assessee, leading to a lack of opportunity to be heard before imposing the penalty. The ITAT found discrepancies in the A.O's handling of the adjournment request and subsequent compliance by the assessee. Citing relevant judicial precedents, the ITAT concluded that the penalty imposition was unjustified and quashed the penalty of Rs. 10,000 under Sec. 271(1)(b).5. Consequently, the ITAT set aside the CIT(A)'s order and allowed the appeal of the assessee, highlighting the importance of providing a fair opportunity for the assessee to be heard before imposing penalties under the Income Tax Act, 1961.