2025 (8) TMI 1186 - AT - Income Tax

Penalty under s.272A(1)(c) deleted where prolonged illness and death were bonafide cause under s.273B after s.131 compliance

Late Nimmatoori Raja Babu Versus The ACIT, Central Circle-2 (4), Hyderabad.

Late Nimmatoori Raja Babu Versus The ACIT, Central Circle-2 (4), Hyderabad. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether penalty under section 272A(1)(c) of the Income Tax Act can be sustained for alleged non-appearance in response to a summons issued under section 131 where the assessee failed to attend the summoned date. 2. Whether the explanation of prolonged sickness (subsequent death) constitutes a bona fide cause exempting the assessee from penalty under section 272A(1)(c) read with section 273B. 3. Whether completion of assessment under section 143(3) after receipt of the assessee's submissions and documents affects the validity of imposing penalty for non-attendance at an earlier summons. 4. Whether the appellate authority erred in sustaining the penalty without proper consideration of the assessee's explanation and supporting documents. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sustenance of penalty under section 272A(1)(c) for non-attendance to summons under section 131 Legal framework: Section 131 empowers the Assessing Officer to summon persons to produce documents and to give evidence. Section 272A(1)(c) prescribes penalty for failure to comply with directions under section 131. Section 273B provides that no penalty shall be imposed if the person establishes that the failure was due to bona fide cause. Precedent Treatment: No judicial precedents were cited or relied upon in the judgment; the Court proceeded on statutory construction and facts on record. Interpretation and reasoning: The Tribunal examined whether non-attendance on the summons date, standing alone, suffices to sustain penalty under section 272A(1)(c) when an explanation invoking sickness (and eventual death) is provided and later submissions were furnished and considered by the AO in completing assessment. The Court treated statutory protections under section 273B as applicable to the fact situation, focusing on whether the cause for non-appearance was bona fide. Ratio vs. Obiter: Ratio - Penalty under section 272A(1)(c) cannot be sustained where non-attendance is shown to be due to bona fide cause under section 273B and the assessee later furnished necessary particulars which were considered in assessment. Conclusions: The Tribunal held that the imposition of penalty under section 272A(1)(c) for non-attendance to summons was not justified on the facts since the assessee established a bona fide cause for non-appearance. Issue 2 - Applicability of bona fide cause (section 273B) where prolonged sickness and death are asserted Legal framework: Section 273B exempts imposition of penalty if failure to comply with the Act is shown to be due to bona fide cause; the assessing authorities must examine the explanation and documentary evidence proffered. Precedent Treatment: No precedent decisions were invoked; the Tribunal applied statutory language and principles of fairness in administrative penalisation. Interpretation and reasoning: The assessee's explanation that prolonged sickness prevented attendance, corroborated by the later filing of information and the production of a death certificate (showing demise after prolonged illness), was considered a bona fide cause. The Tribunal emphasized that where legitimate incapacitation prevents compliance and subsequent co-operation occurs (as assessment was completed after submissions), the threshold for penalty under section 272A(1)(c) is not met. The Tribunal also noted the absence of a requirement that a particular form of evidence (e.g., medical bills) must always be produced before accepting a bona fide claim, especially where later conduct (submission of particulars and completion of assessment) supports the explanation. Ratio vs. Obiter: Ratio - Prolonged sickness culminating in death, supported by subsequent compliance and production of documents, constitutes bona fide cause within section 273B and negates levy of penalty under section 272A(1)(c). Conclusions: The Tribunal concluded that the assessee's sickness and eventual death amounted to a bona fide cause preventing attendance to the summons; consequently, penalty should be deleted. Issue 3 - Effect of completion of assessment under section 143(3) after receipt of submissions on the liability to penalty Legal framework: The power to levy penalty for non-compliance is separate from assessment proceedings, but the authorities must consider subsequent compliance and the substance of the case when deciding penalty. Precedent Treatment: No authorities were cited; analysis is fact-driven. Interpretation and reasoning: The Tribunal treated the fact that the assessee later furnished details and the AO completed assessment under section 143(3) as relevant to the determination of whether the initial non-attendance was culpable. Subsequent furnishing of particulars and the AO's ability to complete assessment on that basis indicated that the non-appearance did not stymie the assessment process and supported the assessee's claim of bona fide inability to attend. Ratio vs. Obiter: Ratio - Subsequent cooperation resulting in completion of assessment is a material circumstance militating against imposition of penalty for earlier non-attendance when bona fide cause is shown. Conclusions: Completion of assessment after receipt of the assessee's submissions weighed against sustaining penalty; the Tribunal directed deletion of the penalty. Issue 4 - Adequacy of appellate authority's consideration of assessee's explanation and documentary evidence Legal framework: Appellate authorities must consider material facts and submissions; sustaining penalty requires proper evaluation of explanations and evidence. Precedent Treatment: No precedents discussed; principle of reasoned decision-making applied. Interpretation and reasoning: The Tribunal found that the CIT(A) 'without considering the relevant facts, has simply sustained the penalty' - indicating an appellate error of omission. The Tribunal emphasized that where the assessee provided an explanation of prolonged sickness and later produced a death certificate, the appellate authority ought to have assessed these materials under section 273B before affirming penalty. Ratio vs. Obiter: Ratio - An appellate authority must evaluate relevant explanations and documentary support before sustaining a penalty; failure to do so is reason to set aside the impugned order. Conclusions: The Tribunal set aside the CIT(A)'s order sustaining penalty and remitted direction to delete the penalty, holding that the appellate authority erred in not considering the bona fide explanation and supporting evidence. Overall Disposition The Tribunal allowed the appeal, set aside the appellate order sustaining penalty under section 272A(1)(c), and directed deletion of the penalty of Rs. 10,000 on the ground that prolonged sickness (and subsequent death), together with subsequent furnishing of particulars and completion of assessment, constituted a bona fide cause under section 273B precluding imposition of the penalty.