2023 (9) TMI 248 - AT - Income Tax

Appellate tribunal upholds penalties for non-compliance with Income Tax Act.

The appellate tribunal upheld penalties imposed on the appellant under sections 271(1)(b) and 271F of the Income Tax Act. The penalties were imposed for ... Levy of penalty u/s. 271(1)(b) - non-compliance of notice issued u/s. 142(1) and not sought for any adjournment of the hearing - Assessee argued for pendency of the quantum appeal - HELD THAT:- It is undisputed fact for the AY 2011-12 assessment was completed ex-parte by passing Best Judgment Assessment u/s. 144 r.w.s. 147 by the AO - For non-compliance of notice u/s. 142(1), the A.O. has levied penalty u/s. 271(1)(b) of the Act. The assessee neither offered any explanation for non-compliance of the notice issued u/s. 142(1) nor sought for any adjournment of the hearing of the case. No reasons to interfere with the levy of penalty u/s. 271(1)(b) of the Act. Thus the grounds raised by the assessee are devoid of merits and the same is hereby dismissed. Levy of penalty u/s. 271F - assessee has filed the Return of Income after issuance of notice u/s. 148 of the Act, even though the taxable income of the assessee is higher, who is liable to file regular Return of Income u/s. 139(1) - HELD THAT:- The assessee offered no explanation before any of the lower authorities for non-filing of regular Return of Income. Therefore the assessee is liable to levy of penalty u/s. 271F of the Act. Thus the grounds raised by the assessee are devoid of merits and the same are rejected. Assessee appeals dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether imposition of penalty under section 271(1)(b) of the Income Tax Act, 1961 is justified where the assessee failed to comply with a notice issued under section 142(1) and assessment was completed ex parte under section 144 read with section 147. 2. Whether imposition of penalty under section 271F of the Act for failure to furnish return under section 139(1) is justified where the return was filed only after issuance of notice under section 148 and the assessee offered no explanation for non-filing within the statutory time. 3. Whether pendency of a quantum appeal or opting for the Vivad Se Vishwas scheme affects liability to penalties under sections 271(1)(b) and 271F. 4. Whether repeated adjournment requests and non-cooperation at appellate hearings are relevant to the determination of the penalty appeals. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Penalty u/s 271(1)(b) for non-compliance with notice u/s 142(1) Legal framework: Section 271(1)(b) empowers levy of penalty where a person fails to comply with any notice under the Income Tax Act; section 142(1) authorises the Assessing Officer to call for information, documents or evidence; section 144 r.w.s. 147 permits best judgment assessment where the assessee does not cooperate in reassessment proceedings initiated after notice under section 148. Precedent Treatment: The Tribunal's reasoning rests on statutory provisions and factual matrix; no external judicial precedents were invoked or relied upon in the impugned orders. Interpretation and reasoning: The Tribunal held that non-compliance with a statutory notice under section 142(1) constitutes a deliberate and conscious disregard of a statutory requirement. The Assessing Officer issued show-cause notices and attempted hearings; the assessee did not furnish any explanation for non-compliance nor sought adjournment before the AO. The subsequent passing of assessment under section 144 r.w.s. 147 due to the assessee's non-cooperation reinforced that the default was attributable to the assessee's intransigence rather than any reasonable cause. The Tribunal rejected the contention that pendency of a quantum appeal absolved the assessee of the duty to respond to statutory notices, observing that the two are distinct: the quantum appeal addresses substantive disputed additions, whereas compliance with section 142(1) is a separate procedural obligation. Ratio vs. Obiter: Ratio - A taxpayer's failure to comply with a notice under section 142(1), without explanation or request for adjournment, justifies imposition of penalty under section 271(1)(b); pendency of a quantum appeal does not excuse non-compliance with procedural notices. Obiter - Observations on the number of adjournment opportunities and the assessee's non-cooperation at multiple hearings are factual remarks supporting the ratio. Conclusion: The Tribunal upheld the penalty under section 271(1)(b) (Rs. 10,000) as justified on the facts: absence of explanation, non-cooperation, and ex-parte assessment justified the penalty. The ground challenging the penalty was dismissed. Issue 2 - Penalty u/s 271F for failure to furnish return u/s 139(1) Legal framework: Section 139(1) imposes an obligation to furnish a return of income by the end of the relevant assessment year where taxable income exceeds the basic exemption; section 271F prescribes penalty for failure to furnish return within the time allowed. Precedent Treatment: The Tribunal applied statutory language and the fact pattern. No judicial authorities were cited to alter statutory interpretation. Interpretation and reasoning: The Tribunal found it undisputed that the assessee had taxable income for the year and did not file the return within the time prescribed by section 139(1). The return was filed only after initiation of reassessment proceedings under section 148. The assessee offered no explanation at any stage for the delay. The Tribunal reasoned that filing a return after issuance of a notice under section 148 does not negate the statutory requirement to file within the relevant assessment year and that absence of an explanation for non-filing warrants levy of penalty under section 271F. The Tribunal rejected the submission that pendency of the quantum appeal affected the liability for penalty under section 271F, since the penalty arises from a technical default (late filing) independent of the merits of any additions in assessment. Ratio vs. Obiter: Ratio - Failure to furnish return within the statutory period under section 139(1), where taxable income exists and no explanation is offered, warrants penalty under section 271F; subsequent filing after notice under section 148 does not cure the statutory default. Obiter - Comment that absence of explanation at any forum (AO, appellant, tax authority) aggravates the position was explanatory factual reasoning. Conclusion: The Tribunal confirmed the penalty under section 271F (Rs. 5,000) on the grounds of technical default and lack of explanation; the ground challenging the penalty was dismissed. Issue 3 - Effect of pendency of quantum appeal and Vivad Se Vishwas scheme on penalty liability Legal framework: The Vivad Se Vishwas Act, 2020 (VSV) provides immunity for certain disputed tax and penalties where a declarant opts into the scheme; section 3 of the VSV Act delimits immunity to penalties levied on disputed tax as defined by the scheme. Precedent Treatment: The Tribunal applied the statutory scope of VSV as a matter of statutory construction; no authority was cited to expand VSV immunity beyond its statutory confines. Interpretation and reasoning: The Tribunal distinguished between penalties levied on disputed tax and penalties arising from procedural or technical defaults. It held that VSV grants immunity only for penalties that are levied on disputed tax covered by the scheme; it does not extend immunity to penalties for technical defaults such as late filing of returns (section 271F) or non-compliance with procedural notices (section 271(1)(b)). Consequently, opting for VSV in respect of quantum additions does not immunise the assessee from penalties arising from separate procedural non-compliance. Similarly, pendency of a quantum appeal does not mitigate or excuse the procedural defaults that form the basis for the penalties under the cited sections. Ratio vs. Obiter: Ratio - Opting into VSV or pendency of a quantum appeal does not bar levy of penalties for procedural defaults when statutory immunity under VSV does not extend to such penalties. Obiter - Observations explaining the limited scope of VSV immunity are explanatory of the ratio. Conclusion: The Tribunal rejected pleas that VSV election or pending appeals should stay or nullify penalties under sections 271(1)(b) and 271F; such pleas have no merit on statutory construction and facts of the case. Issue 4 - Repeated adjournment requests and non-cooperation at appellate hearings Legal framework: Tribunals and appellate authorities have discretion to admit or refuse adjournments; procedural conduct of the assessee is relevant to exercise of such discretion and to credibility of asserted explanations. Precedent Treatment: Decision based on record-based exercise of discretion; no external precedent cited. Interpretation and reasoning: The Tribunal recorded multiple opportunities previously granted to the assessee and noted the absence of substantive material or medical evidence supporting further adjournments. It observed that the assessee did not appoint a representative and repeatedly sought short adjournments without producing the promised details. The Tribunal treated this conduct as reinforcing the factual finding of non-cooperation and absence of reasonable cause for defaults relied upon by lower authorities in imposing penalties. Ratio vs. Obiter: Ratio - Persistent non-cooperation and unjustified adjournment requests may legitimately influence appellate discretion and support upholding penalties where defaults are unexplained. Obiter - Factual remarks about number and timing of adjournments are incidental to the legal conclusions. Conclusion: The Tribunal refused further adjournment, treated the assessee's conduct as corroborative of the finding that no reasonable explanation existed for non-compliance, and dismissed the appeals against penalties accordingly.