MANAVKUMAR M. MEHTA ( HUF),MUMBAI vs. ITO 14(1)(1) (ERSTWHILE), MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

That on facts and circumstances of the case and in law the Ld. CIT(A) has erred in confirming the penalty imposed by the Ld. Assessing Officer u/s 271(1)(b) at Rs.10,000/- without properly appreciating the facts of the case and reasons given for the alleged A.Y. 2012-13 default taken place. As the penalty imposed by the Ld. AO and confirmed by Ld. CIT(A) is wrong on facts and bad in law, therefore appellant prays that same may kindly be deleted.” That the appellant craves the leave to amend, alter, substitute and or to raise new or additional grounds of appeal at the time of hearing.” The brief facts of the case are that the assessee filed his return 3. of income on 29.09.2012 for the A.Y 2012-13 declaring total income to the tune of Rs.8,05,968/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case was selected for scrutiny and the notices u/s 143(2) & 142(1) of the I.T. Act, 1961 were issued and served upon the assessee. The assessee did not response to the notice therefore notice u/s 271(1)(b) of the Act was issued but the assessee failed to appear before him, therefore, the penalty to the tune of Rs.10,000/- was levied. The assessee filed an appeal before the CIT(A) who confirmed the penalty order, therefore, the assessee filed the present appeal before us.

4. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the assessee has argued that the non-appearance of the assessee before the AO was unintentionally, moreover, the assessee appeared before the AO on 28.08.2013 but subsequently failed to appear before the AO inadvertently, therefore, no penalty is leviable in accordance with law. It is also argued that the notice dated 11.07.2014 was received by the an uneducated person which was not given to him as well as to his accountant well in time, therefore, the ITA. No.7209/M/2017 A.Y. 2012-13 absence of the assessee was unintentionally, hence, the penalty is not liable to be tenable in accordance with law. It is also argued that the assessee remain out of city in connection with the business of proprietary firm and the accountant who was looking the accounting matters of the appellant and group concerned had suddenly quit the job therefore, the assessee remain unaware of the notice therefore, no penalty is leviable. In support of his contention the Ld. Representative of the assessee has placed reliance upon the law settled in Hindustan Steel Ltd. Vs. state of Orissa (1972) 83 ITR 26 SC. On the other hand, the Ld. representative of the revenue has strongly relied upon the order passed by the CIT(A) in question. Before going further it is necessary to advert the finding of the CIT(A) on record.:-

3.2. The arguments of the appellant hold no water. The notice dated 11/07/2014 was sent by email to the appellant. Therefore, his contention that it was received by the uneducated peon is factually incorrect. Even if the physical form of the notice was received by the peon, there was still the notice which was sent through email for which the assessee has not complied with. The restructuring of the jurisdiction was a matter which was going on within the Department and the assessee had no role to play whatsoever in this matter. The notification had come into effect from 15/11/ 2014. The notice was issued to the assessee to attend the hearing on 18/07/2014 which is a good four months before the notification date. The appellant taking the plea that he did not know his jurisdiction and therefore he was waiting for the restructuring notification is absurd and ridiculous. When he had received a notice from a particular AO, it is his duty to represent before that AO and cannot wait for some event to happen in future. The learned counsel for the appellant relied upon the judgement of the Hon’ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 25 SC. However, this decision has A.Y. 2012-13 no relevance to the present case of the appellant. The Hon'ble Apex court held in this case that 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 to its obligation. Penalty will not also be imposed merely because it is lawful to do so/' In this case, the facts clearly point to the conclusion that the appellant has deliberately acted in defiance of law as he had riot given any justifiable reason for not complying with the notices issued. In view of the facts and circumstances, the penalty of Rs.10,000/- levied by the AO u/s 271 (1)(b) of the Income Tax Act, 1961 is confirmed. The appeal is dismissed”

5. On appraisal of the above said finding, we noticed that the notice was given to the assessee through email and the notice through registered post was duly served upon him. However, the assessee appeared before the authority on 28.08.2013. No doubt, the proceeding was subsequently going on. The CIT(A) nowhere give the finding upon the plea of the assessee to the effect that the assessee remained out of city in connection with the business of proprietary firm and the accountant who was looking the accounting matters of the appellant and group concerned had suddenly quit the job. This may be the reason of the assessee for not attending the proceeding before the AO. The assessee was not gaining any advantage on account of non-appearance. Hon’ble Supreme Court in the case of Hindustan Steel Ltd. Vs. state of Orissa (1972) 83 ITR 26 SC has held that An order imposing penalty of 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 A.Y. 2012-13 of conduct contumacious or dishonest, or acted in conscious disregard to its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provision of the Act or where the breach flows from a bona fide that the offender is not liable to act in the manner prescribed by the statute.

6. In view of the peculiar facts and circumstances, mentioned above we observed that the intention of the assessee nowhere to defy the law. He once appeared but subsequently failed to appear on account of reasons mentioned above specifically in the circumstances when his regular accountant left the job. The above mentioned law nowhere precluded the power of the AO to levy the penalty in view of the provision in question but specify certain parameter to levy the penalty. Therefore, we are of the view that the finding of the CIT(A) is quite wrong against law and facts which is not liable to sustainable in the eyes of law therefore, we delete the penalty and allowed the appeal of the assessee.