2024 (5) TMI 1528 - AT - Income Tax

Penalty levied u/s 272A(1)(c) - despite issuing summons to the assessee u/s 131 on different dates the assessee failed to attend on dates fixed and AO noted that the assessee failed to appear on eight such occasions - HELD THAT - On perusal of penalty order we find that for first summon the AO recorded that it was return back by postal authorities refused . For second third summon he recorded that summon served through affixture but the assessee neither complied nor sought adjournment. For fourth summon the AO recorded that it was sent through notice server the assessee refused to accept summon. And for remaining three occasions the AO recorded that assessee neither complied nor submitted any adjournment . We find that there is no independent satisfaction of the AO or the ld CIT(A) that they are satisfied with the report about the service of summon on assessee. Both the lower authority proceeded to accept the report of process server or postal authority without recording their independent satisfaction about the service of summon on assessee for the dates fixed. The Hon ble Apex Court in Hindustan Steel Ltd. Vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT has held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty cannot be levied in a routine manner. The discretion vested with the authority is to be exercised judiciously on consideration of all the relevant circumstances. A bona fide breach cannot lead to a penalty u/s 272A. We find that it is not a case of complete non-compliance on the part of the assessee as the assessee attended the officer of investigation wing and given his statement. Thus levying penalty under section 272A(1)(c) for all the alleged default without recording the satisfaction of wilful default is not justified.

Summary

The appeal in this case was filed by the assessee against the order of the ld. CIT(A)-4, Surat, confirming the penalty levied under section 272A(1)(c) of the Income Tax Act. The key issue at hand was whether the penalty imposed on the assessee for non-compliance with summonses issued by the Income Tax Authority was justified.The brief facts leading to the penalty under section 272A(1)(c) involved a search action conducted by the investigation wing of Surat on the Laxmipati Group, including Dilip Sojitra, who was engaged in real estate, brokerage, and financing. The assessee, working as the accountant of Dilip Sojitra, was also covered in the search action. Despite receiving summons under section 131 on multiple occasions, the assessee failed to attend, leading to the imposition of a penalty of Rs. 80,000 for eight defaults.The assessee contended that they had cooperated during the search and post-search actions, and the penalty was unwarranted. However, both the Assessing Officer and the ld. CIT(A) upheld the penalty, emphasizing the repeated defaults by the assessee.During the Tribunal proceedings, the assessee's representative argued that no additions were made in the quantum assessment, and the assessee had always cooperated with the investigation wing. The representative further contended that the penalty should not be imposed automatically without establishing willful default.On the other hand, the Senior Departmental Representative supported the lower authorities' decision, asserting that the assessee failed to provide a reasonable cause for non-compliance with the summonses.The Tribunal carefully reviewed the submissions and lower authorities' orders. It noted that the Assessing Officer and the ld. CIT(A) accepted reports of process servers or postal authorities without independent verification of the service of summonses on the assessee.Referring to the Hindustan Steel Ltd. case, the Tribunal emphasized that penalties should not be imposed for technical or venial breaches and that discretion should be exercised judiciously. It applied this principle to the present case, stating that a bona fide breach should not lead to a penalty under section 272A.After considering the facts and circumstances, the Tribunal found that the penalty for the first default was justified based on the postal authority's report of refusal. However, it deleted the penalty for the remaining alleged defaults, as there was no evidence of willful default.In conclusion, the Tribunal partly allowed the assessee's appeal, upholding the penalty for one default and deleting the penalty for the other seven defaults.