2023 (6) TMI 382 - AT - Income Tax

Assessee's Penalty Deleted: Tribunal Finds Justification

The Tribunal allowed the assessee's appeals, concluding that the penalty imposed under section 271(1)(b) of the Income-tax Act, 1961 was unjustified due ... Penalty u/s 271(1)(b) - failure to sign on the so called 'Consent Letter' which is not an authorized form notified by the Government - HELD THAT:- No penalty is imposable on the person for any failure referred to in the relevant penal provisions prescribed therein, including section 271(1)(b) of the Act, if the assessee proves that there was a reasonable cause for the said failure. It, thus, transpire that the imposition of penalty under section 271(1)(b) of the Act on account of alleged failure to comply with notice issued is not automatic. If there is a reasonable cause for such a failure, then, penalty is not at all imposable in terms of section 273B of the Act. In the context of section 273B of the Act, the expression 'reasonable cause' has been explained to mean a cause which prevents a man of ordinary prudence and average intelligence, acting under normal circumstances, without negligence or inaction or want of bona fide. Hence, keeping in view, the details of the tax payment, investigation of the revenue, provisions of the act and the judicial pronouncement, we delete the penalty levied by the AO u/s 271 (1)(b). Assessee appeal allowed. Issues Involved:1. Jurisdiction and legality of the penalty order under section 271(1)(b) of the Income-tax Act, 1961.2. Compliance with notice issued under section 142(1) of the Act.3. Competence and obligation to sign the 'consent form'.4. Applicability of 'reasonable cause' under section 273B in not furnishing the 'consent form'.Summary:1. Jurisdiction and Legality of the Penalty Order:The assessee contended that the penalty order dated 01.10.2013 under section 271(1)(b) of the Income-tax Act, 1961 was without jurisdiction, illegal, and bad in law. The Tribunal admitted the additional grounds of appeal based on the judgment of the Hon'ble Apex Court in National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383, which allows the Tribunal to consider new grounds necessary for correctly assessing the tax liability.2. Compliance with Notice Issued Under Section 142(1):The assessee argued that they had duly responded to and complied with the notice issued under section 142(1) of the Act. However, the Assessing Officer (AO) imposed a penalty of Rs. 10,000/- under section 271(1)(b) for non-compliance with the information sought under section 142(1), specifically the failure to file a 'consent letter' regarding foreign bank accounts.3. Competence and Obligation to Sign the 'Consent Form':The assessee claimed they were not competent to sign the 'consent form'. The CIT(A) upheld the penalty, stating that refusal to sign the 'consent form' amounted to non-cooperation in the investigation. The Tribunal noted that the 'consent form' was not an authorized form notified by the Government.4. Applicability of 'Reasonable Cause' Under Section 273B:The Tribunal examined section 273B, which states that no penalty shall be imposed if there is a reasonable cause for the failure. The Tribunal found that the case involved deposits in a foreign bank account of HSBC, Geneva, which had been adjudicated previously, and the due taxes were paid by the assessee. The Tribunal also referenced similar cases where penalties were deleted due to reasonable cause, including judgments from the Hon'ble High Court of Madras and the Hon'ble Apex Court.Conclusion:The Tribunal concluded that the imposition of the penalty under section 271(1)(b) was not justified, given the reasonable cause presented by the assessee. The penalty levied by the AO was deleted, and the appeals of the assessee were allowed. The order was pronounced in the open court on 12/05/2023.