SMT. SHANTI DEVI,ALWAR vs. INCOME TAX OFFICER, WARD-2-1, ALWAR

None has appeared on behalf of the assessee however, an application received by the Registry on 27.01.2020 signed by Advocate Shree Chand Gupta wherein it was submitted that written submission may be considered for deciding the present matter. Accordingly, it was decided to hear this matter after considering the written submission of the assessee and hearing the ld. DR and material available on record.

Per contra, the ld. DR submitted that there is clearly non- compliance to two notices U/s 142(1) dated 09.10.2017 and 31.10.2017 issued by the Assessing Officer and thereafter the penalty proceedings was initiated during the course of assessing proceedings, and thereafter vide order dated 26.06.2018, penalty of Rs. 20,000/- was levied for the non compliance to the said notices issued by the Assessing Officer. It was further submitted that the ld. CIT(A) has already restricted the penalty to Rs. 10,000/-, therefore, given the facts and circumstances of the present case, no further relief should be granted in the instant case and the order of the ld CIT(A) may be affirmed and the appeal of the assessee be dismissed.

We have heard the rival contentions and perused the material available on record. It is noted that the penalty proceedings u/s 271(1)(b) were initiated during the assessment proceedings for non-compliance to two notices namely, notice u/s 142(1) dated 9.10.2017 and subsequent notice u/s 142(1) dated 31.10.2017 and thereafter, penalty was levied u/s 271(1)(b) for Rs 20,000/- vide order dated 26.06.2018. On appeal, the ld CIT(A) has reduced the penalty to Rs 10,000 apparently for the reason that subsequent default is continuation of the initial default and penalty cannot be levied for each and every default.

The issue therefore is limited to non-compliance to first notice issued u/s 142(1) dated 9.10.2017 and levy of penalty u/s 271(1)(b) and whether there is reasonable cause for non-compliance in terms of section 273B of the Act or not. Firstly, coming to the contentions advanced by the assessee wherein it has been contended that she, being an illiterate lady, has appointed a Chartered accountant to represent her case before the Assessing officer and where there is non- appearance or non-compliance on part of the Chartered Accountant, she cannot be penalized. In this regard, we refer to the proceedings before the Assessing officer and find that notice u/s 142(1) was issued on 9.10.2017 and matter was scheduled for hearing on 16.10.2017. On the scheduled date of hearing, Shri V.K. Datta, CA appeared as authorized representative and sought adjournment for 07 days and matter was accordingly adjourned for 24.10.2017 on which date, however, there was no attendance on part of the authorized representative and thereafter, another notice u/s 142(1) was issued on 31.10.2017. The information/documents so sought by the Assessing officer necessarily have to be provided by the assessee to the authorized representative. However, there is nothing on record which demonstrate that such documents were either in the possession of the authorized representative at the time of initial hearing and he wanted time to go these documents before submitting to the Assessing officer or the assessee has subsequently submitted these documents to the authorized representative to be submitted to the Assessing officer which the authorized representative failed to submit before the Assessing officer. Therefore, we find that though there is non-appearance on part of the authorized representative at the second scheduled date of hearing, at the same time, the possibility of non-availability of the requisite documents as so required by the Assessing officer cannot be ruled out. Therefore, in absence of these facts and without confronting the authorized representative, we are unable to accede to the contention of the assessee that merely because she has authorized a Chartered accountant, the entire fault lies with the Chartered accountant and assessee cannot be faulted as the non-compliance is by way of non-filing of the information/documents so sought by the Assessing officer and not limited to attending to the proceedings before him.

The second contention raised by the assessee is that since the assessment order passed by the Assessing Officer has been held as void ab-initio by the ld. CIT(A), the consequent penalty u/s 271(1)(b) levied by the Assessing Officer does not stand and the same may be kindly deleted. In this regard, firstly, we find that there is no finding recorded by the Assessing officer or by ld CIT(A) and there is nothing on record that the assessment order has been declared void ab-initio by the ld CIT(A). Having said that, we refer to the provisions of section 271(1)(b) which provides that where the Assessing officer in the course of any proceedings is satisfied that any person has failed to comply with a notice issued under section 142(1) of the Act, he may direct that such person shall pay by way of penalty, in addition to tax, if any payable by him, a sum of ten thousand rupees for each such failure. Therefore, we find that the levy of penalty u/s 271(1)(b) is independent of levy of tax and even where there is no tax payable, the penalty can still be levied u/s 271(1)(b) and the contention so advanced can’t be accepted.

Having said that, we find that during the course of penalty proceedings, the assessee was issued a show-cause dated 29.05.2018 and in response, the assessee submitted that the appeal has been filed against the assessment order before the ld CIT(A) and the matter may be adjourned till disposal of appeal by the ld CIT(A). However, the Assessing officer didn’t accept the assessee’s contentions and proceeded with levy of penalty u/s 271(1)(b) of the Act and the findings of the Assessing officer reads as under:-

We thus find that where the assessee’s contentions to keep the penalty proceedings were not found acceptable to the Assessing officer, the assessee should have been allowed another opportunity to put worth her contentions on merits of levy of penalty. However, the Assessing officer without providing any such opportunity to the assessee, passed the penalty order. Therefore, on this ground itself, where there is lack of opportunity before levy of penalty, the penalty so levied deserved to be set-aside. Further, we find that there is no independent finding recording by the Assessing officer while levying the penalty and merely referring to the findings in the assessment order, he has arrived at a conclusion that the assessee has willfully not complied with the notices and not co-operated in finalizing the assessment proceedings. It is a settled position that assessment and penalty proceedings are two separate and distinct proceedings and though reference can be drawn to the findings in the assessment order, the Assessing officer has to record independent findings as to why penalty may be levied in the given case which we find lacking in the instant case and penalty so levied therefore cannot be sustained.

In the entirety of facts and circumstances of the case, the penalty so levied and sustained by the ld CIT(A) is set-aside and the matter is decided in favour of the assessee and against the Revenue.