SHRI JWALA PRASAD AGGARWAL,GURGAON vs. DEPUTY COMMISSIONER OF INCOME-TAX, NEW DELHI

Since in all the appeals the issues involved are same arising out of the identical set of facts, therefore, the same were being heard together and are being disposed off by way of this consolidated order.

The assessee is mainly aggrieved by the levy of penalty of Rs. 20,000/- u/s 271(1)(b) for all the impugned assessment years which was on account of failure to comply with the statutory notices/ date fixed for hearing on 30.11.2012 and 28.12.2012.

The brief facts qua the levy of impugned penalty are that the assessee is an individual working with the MDLR group of companies and was also director and share holder in some of the group companies. A search and seizure action u/s 132(1) was conducted at various premises of MDLR group and also at the residential premises of the assessee in January, 2008. In pursuance of search and seizure operation, proceedings u/s 153A were initiated in case of the assessee and assessments have been completed for the impugned assessment years passed under section 144 read with section 153A. During the course of the assessment proceedings the Assessing Officer initiated penalty proceedings u/s 271(1)(b) for non- compliance of certain statutory noticesby the assessee and accordingly, show cause notice was issued on 24.6.2013. In response to the show cause notice, the assessee filed very detail explanation, challenging the validity of initiation of penalty proceedings and explaining the reasonable cause for non-compliance on the appointed days. The sum and substance of assessee’s explanation is that;

However, the ld. Assessing Officer levied the penalty of Rs. 20,000/- on the ground that the assessee did not attend offices in Page 3 of 10 response to the various notices issued or date fixed on two of the occasions.

The Learned CIT(Appeals) too has confirmed the said penalty after observing and holding as under:- “8.3. None of the reasons given in the written submission, namely, search operations on the MDLR group in January 2008, detention of Shri Gopal Goyal, poor turn-out of employees at work place, large number of pendency of assessments u/s 153A, and preparation of voluminous details, constitute ‘reasonable cause’ that prevented the appellant from complying with the aforementioned notices or filing letters to seek adjournment. Search had taken place in January 2008, following which 153A proceedings were inevitable. The revision petitions u/s 264 were moved by the appellant and the subsequent assessments were required to be completed by the AO before the limitation date, in respect of which also, as per the AO, the requisite details were not being filed. In considering the matter of penalty u/s 271(1)(b), that relates to non-compliance to a statutory notice, issued in the case of a specific assessee for a particular AY requiring attendance on the stated date, the pendency of a large number of other cases of the group is an irrelevant fact. Moreover, the burden of pendency of assessments was larger for the AO, who was required to examine each case, examine the seized materials, obtain the explanation of each assessee, carry out necessary verifications, afford opportunity to each of them in terms of the principle of natural justice, and thereafter pass the assessment order before the time barring date. Thus, the reasons cited in the written submission are rejected. 8.4. Filing of several writ petitions before the Hon'ble High Court, which in turn required substantialpaperwork, was a personal and private decision of the assessees of the group and can hardlyconstitute a justification for non-compliance of the statutory notices in the case of the appellant. Moreover, if the Page 4 of 10

Before us, the ld. Counsel submitted that in response to the show cause notice u/s 271(1)(b), the assessee has filed very exhaustive reply before the Assessing Officer. The copy of which are appearing at pages 7 to 13 of the paper book and also pointed out that during the course of the assessment proceedings various submissions were filed which have not been properly considered. The detail of replies filed on various cases including that of assessee sent through registered post or dak has been illustrated at pages 14 to 16of the paper book. Apart from that, he submitted that in the first appeal the relief has already been granted to the assessee and income has been computed at “nil” and such appellate orders have attained finality. The copy of the assessment ordersgiving effect to the first appellate order computing the income at ‘nil’ incomeright from assessment years 2002-03 to 2008-09 has been placed in the paper book. Thus, he submitted that no penalty can be levied u/s 271(1)(b) under these facts and circumstances of the case as there was a reasonable cause for delay in filing of the replies.

On the other hand, the Ld. DR strongly relied upon the observation and findings of the Learned CIT(Appeals).

We have heard the rival submissions and also perused the relevant finding given in the impugned order. Here in this case, first of all, on perusal of the penalty notice as appearing at page no. 6 of the paper book, it is seen that nowhere the Assessing Officer has mentioned about any particulars of statutory notice/s for which there was any default on part of the assessee. Show cause notices issued for initiating penalty proceedings should be specific and without any ambiguity, because the assessee while giving the explanation should be aware of the charge for which penalty is being initiated and can give his specific rebuttal. Such vague notice is fatal to the initiation of the proceedings itself. Further from the perusal of the assessment order, it is gathered that the assessee did not attend the proceedings on 20.11.2012 and 30.11.2012. The assessing officer further mentions that on 5.12.2012, Shri Vishal Mehta, AR along with other authorized persons appeared before him and submitted that non-compliance on the part the assessee on the said Page 6 of 10 date were due to the fact that group head, Shri Gopal Kumar Goyal was currently not available and the whole family members and the group heads were engaged in ongoing court proceedings to get early release of Shri Gopal Kumar Goyal who was in judicial custody. This contention raised by the assessee before the Ld. Assessing Officer, in the course of the assessment proceedings have not been accepted and he proceeded to make the assessment u/s 144 read with section 153A. However on perusal of various replies filed by the assessee before the Assessing Officer during the assessment proceedings, it is seen that most of the compliances have been made through replies/letters sent to the Assessing Officer either by filing in the dak or through registered/speed post. This is further corroborated by details of replies filed in various group cases as referred to by Ld. Counsel before us. Ostensibly there may be a case of delay in compliance or filing of replies before AO and not personally appearing before the Assessing Officer on a particular date, but compliances in form of replies do have been filed in the course of assessment proceedings and all the necessary details required for the purpose of assessment has been provided. What are required to be seen while levying penalty for non-compliance of statutory notices, is the facts and circumstances for non-appearance on the specified date, that is, whether there was any reasonable cause and the overall conduct of the assessee. The main planks for reasonable cause pleaded by the assessee has been that, firstly, the key person/group head, Shri Gopal Kumar Goyal who was entrusted with income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release and various employees were leaving Page 7 of 10 the group further accentuating the problems; secondly, more than 300 group assessments were initiated in the wake of search proceedings which were simultaneously going on, therefore, it was difficult to comply to the various notices on short dates; lastly, it has been strongly pleaded before us, that the compliances had been made through replies filed through dak or registered post though belatedly. These facts have not been controverted by the AO or CIT (Appeals). All these facts and circumstances under any prudence do constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause as highlighted by the assessee not only during the course of the assessment proceedings but also before the Assessing Officer and Learned CIT(Appeals) in the impugned penalty proceedings and hence penalty cannot be levied in such circumstances.

Apart from that,one important fact brought on record is that, the demand in the quantum proceedings has been reduced to “nil”, after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach. Accordingly, the levy of penalty of Rs. 20,000/- u/s 271(1)(b) for all the assessment years is unsustainablefor the reasons given above and is directed to be deleted. Thus, grounds raised by the assessee are allowed.

Since similar facts are permeating through in all the assessment years, therefore our finding given above will apply mutatis mutandis for all the years appealed before us and accordingly penalty levied u/s 271(1)(b) are directed to be deleted.

In the result, the appeal of the assessee is allowed.