2025 (2) TMI 1388 - AT - Income Tax

Failure to respond to assessment notices: penalty deleted where reasonable cause, illness and change of professional representation established.

Tribunal addressed levy of penalty for failure to respond to assessment notices and applied the doctrine of reasonable cause and immunity under applicable ... Levy of penalty u/s.271(1)(c) - assessee not responding to certain notices issued online by the ld. AO - Reasonable cause and immunity u/s 273B - discretion of the authority for imposition of penalty HELD THAT:- As in assessee’s own case for the A.Y.2014-15 and 2016-17 [2024 (12) TMI 1693 - ITAT MUMBAI] similar penalty levied has been deleted by the Tribunal as held whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Director who underwent huge emotional hardship was the key person responsible for the tax disputes of the assessee. It is also not contradicted that the medical documents filed by the assessee related to the parents of the said Director is false. Therefore, there was sufficient cause on behalf of the assessee for not able to respond to the notices issued during the assessment proceedings due to illness of the Directors father and demise of his mother, along with the fact that assessee had changed the professional during the year to act upon the tax disputes. Therefore, the assessee is entitled for exemption under section 273B. We thus direct to delete the penalty levied under section 271(1)(b) of the act in the hands of the assessee. Since on similar facts penalty has been deleted for earlier and subsequent year therefore, penalty levied u/s.271B for the A.Y.2015-16 is also deleted. Assessee appeal allowed. Issues: Whether the penalty imposed under section 271(1) for failure to respond to statutory notices in assessment proceedings for A.Y.2015-16 should be deleted on the ground of reasonable cause and immunity under section 273B.Analysis: The Tribunal examined whether the assessee had a reasonable cause for non-compliance with notices issued under sections 143(2) and 142(1). The analysis addressed the protective scope of section 273B which provides immunity from penalty where a reasonable cause is shown, the quasi-criminal character of penalty proceedings under section 271(1) and the judicial discretion to refuse penalty in cases of bona fide or venial breaches. The Tribunal considered documentary evidence concerning serious illness and death in the director's family and a change of professional advisors, and treated those facts as sufficient to constitute a reasonable cause for non-response to the notices.Conclusion: The penalty levied under section 271(1) for A.Y.2015-16 is deleted as the assessee is entitled to immunity under section 273B on the ground of reasonable cause; the appeal is allowed.