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Facts
The assessee's original return for AY 2009-10 was followed by a search action on a third party, leading to assessment proceedings against the assessee u/s 153C for alleged bogus loans and commission u/s 69C. The assessee failed to respond to a notice u/s 142(1) dated 07.11.2022, resulting in a penalty of Rs. 10,000/- imposed u/s 271(1)(b) by the AO, which was upheld by the CIT(A).
Held
The Tribunal found that the assessee had consistently raised objections regarding the jurisdiction of the assessment proceedings under section 153C, which were only disposed of on 17.11.2022. Given that a notice under section 142(1) for which the penalty was levied was issued during or immediately after these jurisdictional challenges, the assessee had valid reasons for not responding on merits. Consequently, the Tribunal concluded that the imposition of penalty under section 271(1)(b) was unjustified.
Key Issues
Whether the penalty under section 271(1)(b) for non-compliance with a notice under section 142(1) is justified when the assessee challenges the jurisdiction of the assessment proceedings under section 153C.
Sections Cited
139, 127, 153C, 153A, 69C, 142(1), 271(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES : E : NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Assessee against the order dated 21.12.2023 of the Commissioner of Income Tax (Appeals)-23, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No. CIT(A), Delhi-23/10024/2008-09 arising out of the appeal before it against the order dated 27.07.2023 passed u/s 271(1)(b) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’), by the DCIT, Central Circle-04, New Delhi (hereinafter referred to as the Ld. AO).
2. The assessee’s return of income u/s 139 was filed on 31.07.2009 and, thereafter, a search action was conducted in case of a group of Gehlot & Company on 10.10.2018 wherein on the basis of seized documents, data in case of M/s CIFSL group of cases which was part of the search, certain documents and information were found allegedly pertaining to the assessee and, on the basis of which satisfaction was recorded and the cases were centralized by order u/s 127 of the Act. Thereafter, notice u/s 153C r.w.s. 153A of the Act was issued on the assessee on 07.07.2021, but, no return was filed and AO examined the return of the assessee as filed u/s 139 of the Act and, on the basis of the alleged incriminating documents and evidence pertaining to the assessee, made addition on account of bogus unsecured loans and also commission u/s 69C of the Act. However, the assessee had failed to respond to the notice u/s 142(1) of the Act issued to the assessee on 07.11.2022 fixing the date of hearing to be on 14.11.2022. As no response was received from the assessee nor any adjournment was sought, notice u/s 271(1)(b) of the Act dated 17.01.2023 was issued to the assessee in response to which also no submission was filed by the assessee and, therefore, the penalty of Rs.10,000/- was imposed by the AO u/s 271(1)(b) of the Act which was challenged before the CIT(A) wherein, apart from questioning the imposition of penalty on the basis that the notice was duly responded, it was also alleged that jurisdiction of assessment u/s 153C of the Act was illegally exercised. However, CIT(A) had dismissed the appeal for which the assessee is in appeal raising the following grounds:- 2 “1. The CIT(A) erred in law and on facts in confirming the penalty u/s 271(l)(b) of the Act by ignoring the categorical submissions of the assessee placed on record vide letter dated 01/12/2023 that there was no failure of the assessee to submit reply though the impugned proceedings were completely illegal and void ab initio. Thus, the same should be quashed.
The impugned penalty order is otherwise also void ab initio and illegal because the impugned compliance desired by itself was in an illegal reassessment proceedings initiated u/s 153C of the Act, without jurisdiction and mandatory requirements as has been held in DCIT vs U K Paints (Overseas) Ltd 2023-TIOL-58-SC-IT as no incriminating material for this assessment year was found in an income-tax search conducted on some other assessee. Thus, the entire proceedings were illegal and could result into any legal penalty, needs to be quashed. 3 The impugned order is an example of not only blatant misuse of the process of law and adjudicating power by the AO but also unambiguously demonstrates lack of knowledge of the AO of the legal provisions of the law entrusted on him by the Legislature to be exercised judicially and not at all to harm the subject of the State recklessly. 4 The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.”