2023 (7) TMI 795 - AT - Income Tax

Penalty under Income Tax Act overturned due to unjustifiable imposition without considering explanations. Appeal granted in favor of assessee.

The Tribunal found the penalty imposed under section 271(1)(b) of the Income Tax Act, 1961 unjustifiable as the appellant's explanations were not ... Levy of penalty u/s 271(1)(b) - assessee did not comply with the notice issued u/s 142(1) - HELD THAT:- Assessee submitted that the assessee appeared before the AO and also filed a written reply to the notices issued during the assessment proceedings. The same was completely ignored by the AO and the assessment order was passed u/s 144 r.w.s. 147 - CIT(A) without controverting the aforesaid fact dismissed the appeal filed by the assessee against the penalty order passed under section 271(1)(b) of the Act, since the assessee could not respond to notices of hearing. AR submitted that since the notices of hearing issued by the learned CIT(A) were not received, therefore, the assessee could not attend to the same. In the present appeal, the assessee is duly represented by the learned AR and wishes to pursue the litigation against the penalty levied by the AO. Penalty under section 271(1)(b) is unsustainable in the peculiar facts of the present case - Appeal by the assessee is allowed. Issues involved:The appeal challenges the penalty order under section 271(1)(b) of the Income Tax Act, 1961, based on failure to comply with notices.Details of the Judgment:Issue 1: Penalty OrderThe assessee raised multiple grounds against the penalty order, arguing it was bad in law and factually incorrect. The lower authorities were criticized for imposing a penalty without considering the appellant's explanations or the fact that the appellant had appeared before the Assessing Officer. The appellant contended that the penalty of Rs. 10,000 was unjustifiable and not supported by the law or judicial principles.Issue 2: Assessment ProceedingsThe Assessing Officer initiated penalty proceedings under section 271(1)(b) due to the assessee's non-compliance with notices issued under section 142(1) of the Act. The AO added an amount of Rs. 1,61,19,082 to the total income of the assessee as undisclosed income. The penalty was imposed as the assessee failed to respond to the notices, leading to the levy of Rs. 10,000.Issue 3: Appeal and DecisionThe assessee argued before the CIT(A) that they had appeared before the AO and submitted written replies during the assessment proceedings, which were ignored. The CIT(A) dismissed the appeal since the assessee did not respond to the hearing notices. The AR representing the assessee stated that the hearing notices were not received, preventing attendance. The Tribunal found the penalty unsustainable in the circumstances and directed the AO to delete the penalty of Rs. 10,000. Consequently, the grounds raised by the assessee were allowed, and the appeal was granted in favor of the assessee.