2019 (3) TMI 159 - AT - Income Tax

Tribunal cancels penalties for non-response in tax assessments, citing double prejudice against assessee.

The Tribunal allowed the appeals filed by the assessee against the penalty under section 271(1)(b) for the assessment years 2009-10, 2010-11, and 2011-12. ... Penalty u/s. 271(1)(b) - Non response to notice issued in assessment proceedings - Ex-parte order - Substantial addition was made in assessment - assessee received from accommodation entries for purchases - HELD THAT:- The notice sent has returned unserved. Hence, we proceeded to adjudicate the issue by hearing the Departmental Representative and perusing the records. Upon careful consideration, we note that in response to notices for reopening, the assessee has duly responded and submitted that the return filed earlier should be accepted as return filed pursuant to notice u/s.148. The reopening related to information that assessee has received accommodation entries for purchases. Since that assessee was not able to produce these parties pursuant to notices, the entire amount has been added. When the non response has already led to addition of the entire amount and the very purpose of the notice was to ask the assessee to produce the parties, in our considered opinion, penalty levied for non-response by the assessee in this regard will amount to double prejudice. In our considered opinion, the same is not sustainable. Hence, we levy of penalty. - Decided in favour of assessee. Issues:Appeals against penalty u/s. 271(1)(b) for A.Y. 2009-10, 2010-11, and 2011-12 based on bogus purchases from hawala operators.Analysis:The appeals were filed against the penalty levied under section 271(1)(b) of the Income Tax Act, 1961 for the assessment years 2009-10, 2010-11, and 2011-12. The assessment was reopened due to information indicating the assessee's involvement in bogus purchases from hawala operators. The assessee requested reasons for reopening and argued that the earlier filed return should be accepted as a response to the notice u/s.148. Subsequently, the AO issued notices to produce the parties involved, but due to non-compliance and non-production of parties, the entire amount was added to the assessee's income, and a penalty was imposed for non-response to the notice u/s.271(1)(b).The Tribunal noted that the assessee had responded to the reopening notices by requesting acceptance of the earlier filed return as a response to the notice u/s.148. The issue revolved around the inability of the assessee to produce the parties involved in the alleged transactions, leading to the addition of the entire amount. The Tribunal observed that imposing a penalty for non-response, which had already resulted in the addition of the entire amount, would amount to double prejudice against the assessee. Therefore, the Tribunal held that the penalty levied for non-response was not sustainable, as the purpose of the notice was to produce the parties, which the assessee failed to do.Consequently, the Tribunal set aside the orders of the lower authorities and deleted the penalty levied on the assessee. The appeals filed by the assessee against the penalty under section 271(1)(b) for the relevant assessment years were allowed. The judgment was pronounced in open court on 27.02.2019.