2017 (10) TMI 629 - AT - Income Tax

Tribunal upholds penalties for non-compliance with tax notices

Sanjay Dalmia Versus DCIT, Central Circle-2, New Delhi

Sanjay Dalmia Versus DCIT, Central Circle-2, New Delhi - TMI Issues Involved: Penalty under Section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with notices issued under Section 142(1).Issue-wise Detailed Analysis:1. Confirmation of Penalty by CIT(A):The learned Commissioner of Income Tax (Appeals) confirmed the penalty levied by the Assessing Officer under Section 271(1)(b) of the Income Tax Act, 1961, amounting to Rs. 10,000/- for each assessment year from 2006-07 to 2012-13. The basis for the penalty was the appellant's failure to furnish a 'consent form' regarding an alleged undisclosed overseas bank account. The appellant denied owning any such bank account and argued that it could not generate a consent form for an account it did not possess.2. Non-compliance with Notice under Section 142(1):During the assessment proceedings, a notice under Section 142(1) was issued to the assessee, calling for information about the alleged foreign bank account. The assessee was required to submit the account opening form, complete bank statements, and residential status. Additionally, if the assessee did not have the bank account, a duly filled and notarized consent letter was demanded. The assessee did not comply with this notice, leading to the initiation of penalty proceedings.3. Assessee's Arguments:The assessee argued that it did not own any bank account with HSBC Bank, Geneva, and thus could not provide the consent letter. The appellant claimed to have complied with the notice by submitting a letter on 23.07.2013. The assessee also contended that there was no specific provision for issuing a notice under Section 142(1) in search proceedings, and therefore, no penalty could be levied for non-compliance with such a notice.4. CIT(A)'s Findings:The CIT(A) upheld the penalty, stating that the information received from a foreign government under the Double Taxation Avoidance Agreement (DTAA) indicated that certain Indian passport holders had undisclosed bank accounts with HSBC in Switzerland. The CIT(A) emphasized that the purpose of the penal provision under Section 271(1)(b) is to ensure compliance with tax investigations. The refusal to sign the consent form was seen as a deliberate refusal to join the investigation, warranting the penalty.5. Tribunal's Analysis and Decision:The Tribunal agreed with the CIT(A) and upheld the penalty for several reasons:- The name of the assessee appeared in a document received under the DTAA, indicating a connection with the foreign bank account.- The assessee's refusal to sign the consent form was viewed as an attempt to obstruct the investigation.- The Tribunal rejected the argument that there was no provision for issuing a notice under Section 142(1) in search proceedings, stating that the Assessing Officer is empowered to issue such notices even in assessments under Section 153A.- The Tribunal found that the deletion of the addition in the hands of the assessee did not affect the penalty, as the addition was made on a protective basis and upheld substantively in the hands of other family members.6. Reliance on Case Laws:The Tribunal distinguished the present case from other cases cited by the assessee, noting that those cases did not involve information received under the DTAA or the specific circumstances of this case. The Tribunal also referred to a Supreme Court decision, emphasizing that penalties for failure to carry out statutory obligations should not be imposed unless the non-compliance was deliberate or contumacious.Conclusion:The Tribunal dismissed the appeals filed by the assessee, upholding the penalties levied under Section 271(1)(b) for non-compliance with notices issued under Section 142(1). The decision emphasized the importance of cooperation in tax investigations and the consequences of deliberate non-compliance.