JAYWANT SUKUR VAITHY,MUMBAI vs. ITO WARD 2 (1), THANE

In this appeal, the assessee has assailed order dated 02.11.2018 of learned Commissioner of Income Tax (Appeals)–1, Thane confirming the penalty imposed of Rs. 40,000/- u/s 271(1)(b) of the Income Tax Act, 1961 for the assessment year 2009-10.

When the appeal was called for hearing, none appeared on behalf of the assessee. Considering the nature of dispute, we proceed to dispose of the appeal ex-parte qua the assessee after hearing the learned Departmental Representative and perusing the materials on record. Assessment Year: 2009-10 3. We have heard the learned Departmental Representative and analysed the facts on record. As could be seen, the assessee is an individual and is a dealer in LPG Gas Cylinder through his proprietary concern M/s Tirupati Gas Services having his office at B-2, Vasundhara Building, Bhayander. For the assessment year under dispute, the assessee had filed his return of income declaring total income of Rs. 3,24,130/-. Assessment in case of the assessee was originally completed under section 144 of the Act vide order dated 20.12.2011. While completing the assessment as aforesaid, the Assessing Officer (AO) alleged that the assessee did not comply with the notice issued under section 142(1) and 143(2) of the Act. Therefore, he initiated proceeding for imposition of penalty under section 271(1)(b) of the Act and ultimately passed an order on 27.06.2012 imposing penalty of Rs. 40,000/- under the said provision. Against the penalty order so passed, the assessee preferred appeal before learned Commissioner (Appeals). During the pendency of the said appeal before the First Appellate Authority, the revision application filed by the assessee under section 264 of the Act challenging the assessment order passed under section 144 of the Act was taken up for hearing by the learned Commissioner of Income Tax (CIT). Being satisfied with the pleading of the assessee that non-compliance in course of assessment proceedings was due to illness and further, noticing that as per the confirmation received from M/s Bhagini Nivedita Sahkari Bank Ltd. Talegaon, set aside the assessment order passed under section 144 of the Act with a direction to the AO to pass a fresh assessment order after making proper enquiries and providing due opportunity of being heard to the assessee.

In pursuance to the aforesaid directions of learned CIT, the AO initiated assessment proceedings afresh and ultimately passed assessment order under section 143(3) of the Act on 13.12.2013 accepting assessee’s claim that he did not have any account with the concerned banks as referred to in the original assessment order. Therefore, the AO completed the assessment more or less accepting the income returned by the assessee, except, for a small disallowance Assessment Year: 2009-10 of expenditure on purely ad-hoc basis. Thus, from the aforesaid facts, it is very much clear that non-compliance by the assessee with various statutory notices issued by the AO in course of original assessment proceedings was not deliberate, but due to reasonable cause. Appreciating difficulties faced by the assessee in course of original assessment proceedings, learned CIT, therefore, has set aside the assessment order passed under section 144 of the Act. That being the case, non-compliance with the statutory notices issued under section 142(1) and 143(2) of the Act in course of original assessment proceedings constitutes reasonable cause under section 273B of the Act. Therefore, imposition of penalty under section 271(1)(b) of the Act is unsustainable.

Pertinently, the impugned order of learned Commissioner (Appeals) confirming the penalty imposed under section 271(1)(b) of the Act was passed on 02.11.2018. Undoubtedly, the penalty proceedings under section 271(1)(b) of the Act was initiated for non-compliance with the statutory notices issued in course of original assessment proceedings. It is a matter of record that the original assessment order passed under section 144 of the Act, in the meanwhile, has been set aside by the learned CIT to AO with a direction to pass a fresh assessment order. Thus, it is a fact on record that by the time learned Commissioner (Appeals) passed the impugned order confirming the penalty imposed under section 271(1)(b) of the Act, the assessment order passed under section 144 of the Act forming the basis of the penalty order had lost its existence. Therefore, the penalty order passed under section 271(1)(b) of the Act cannot survive. Of course, it may be a fact that learned Commissioner (Appeals) has passed the impugned order being oblivious of the order passed under section 264 of the Act by learned CIT. However, this is of little consequence, as, the fact of the matter is, in pursuance to the directions of learned CIT the AO has passed the fresh assessment order under section 143(3) of the Act, meaning thereby, the assessee has not only complied with the notices issued under section 142(1) and 143(2) of the Act but has also participated in the assessment proceedings. In view of the aforesaid, we have Assessment Year: 2009-10 no hesitation in deleting the penalty imposed under section 271(1)(b) of the Act. Grounds are allowed.