2015 (2) TMI 1310 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee had not complied with notice under section 142(1) - HELD THAT - AO had not contravened the assertion made by the assessee that the FAA has not considered that vital issue while deciding the appeal that in the assessment order the AO has mentioned that the AR of the assessee has appeared before him time to time that the assessed income is same as the returned income. As the assessee had appeared before the AO so there was no justification for levy of penalty u/s.271(1)(b) of the Act. We also find that the predecessor of the FAA had deleted the penalty levied by the AO u/s. 271(1)(b) . Secondly in the matter of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust 2007 (8) TMI 386 - ITAT DELHI-G held that assessee had not complied with notice under section 142(1) but assessment order was passed under section 143(3) and not under section 144 that meant that subsequent compliance in assessment proceedings was considered as good compliance and defaults committed earlier were ignored by AO and therefore levy of penalty under section 271(1 )(b) was not justified - Decided in favour of the assessee.

Summary

Issues:
- Challenge to penalty u/s. 271(1)(b) of Rs. 10,000
- Non-appearance before AO leading to penalty proceedings
- Appeal before First Appellate Authority (FAA)
- Argument of the Authorised Representative (AR) and Departmental Representative (DR)
- Tribunal's decision based on non-appearance and compliance with assessment proceedings

Issue 1: Challenge to penalty u/s. 271(1)(b) of Rs. 10,000
The Assessing Officer (AO) issued a notice u/s 142(1) for a hearing, but the assessee did not appear. Subsequently, a penalty of Rs. 10,000 was levied under section 271(1)(b) r.w.s. 274 of the Act. The First Appellate Authority (FAA) upheld the penalty, stating it was the 3rd default and no reasonable cause was shown. The Authorised Representative (AR) argued that the assessee had appeared before the AO, and the Departmental Representative (DR) contended the assessee did not appear on three occasions.

Issue 2: Non-appearance before AO leading to penalty proceedings
The assessee, in response to the penalty notice, mentioned that its representatives were made to wait outside the AO's office, and the Addl. CIT intervened to mark the presence of the assessee. The Tribunal found that as the assessee had appeared before the AO, there was no justification for the penalty. The Tribunal also noted that the AO's predecessor had deleted a similar penalty earlier, and cited a Delhi Tribunal order where subsequent compliance was considered good compliance, leading to the penalty being unjustified.

Issue 3: Appeal before First Appellate Authority (FAA)
The FAA upheld the penalty, considering it the 3rd default and finding no reasonable cause for non-compliance by the assessee. The AR argued that the assessee had appeared before the AO, while the DR stated the assessee did not appear on three occasions. The FAA's decision was based on the assessee's failure to comply with the AO's directions despite previous penalties.

Issue 4: Argument of the Authorised Representative (AR) and Departmental Representative (DR)
The AR contended that the assessee had appeared before the AO whenever called, and the DR supported the FAA's decision that the assessee did not appear on three occasions. The AR referred to the AO not marking the presence of the assessee in the order sheet initially, and the DR highlighted the assessee's repeated non-appearance.

Issue 5: Tribunal's decision based on non-appearance and compliance with assessment proceedings
The Tribunal found that the penalty was unjustified as the assessee had appeared before the AO, and the AO had not refuted the claim of the assessee waiting outside the office. The Tribunal also considered the Delhi Tribunal's order where subsequent compliance was deemed sufficient, leading to the penalty being unwarranted. Consequently, the Tribunal decided in favor of the assessee, allowing the appeals filed by all three assessees.