RAJENDRA G PRIKH,MUMBAI vs. DCIT CC 44, MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) This bunch of seven appeals is by the assessee against the impugned orders all dated 17/09/2014 of the Ld. First Appellate Authority, Mumbai, challenging the levy of penalty u/s 271(1)(b) of the Income Tax Act, 1961 (hereinafter the Act).

“These appeals have been filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-38, Mumbai {(in short ‘CIT(A)’}, dated 30.05.2014 for the assessment years 2005- 06 to 2011-12, passed against the penalty order passed by the Assessing Officer (in short ‘AO’) u/s 271(1)(b) of the Act, involving common issue of levy of penalty on the following grounds:

“1.On the facts and circumstances of the case and in law, the Commissioner of Income Tax,(Appeals)-38, Mumbai erred in TO 6950/Mum/2014 3 Rajendra G. Parikh upholding the action of the Assessing Officer, Mumbai in levying the penalty under section 271(1)(b) of the Income Tax Act, 1961. 2. The appellant carves to leave to add, to alter, to amend, to modify and to substitute the grounds of Appeal at any time before or at any time of hearing of the appeal.”

2. During the course of hearing, arguments were made by Ms. Nidhi Patel, Authorised Representative (AR) on behalf ofthe Assessee and by Shri K Mohandas, Senior Departmental Representative (DR) on behalf of the Revenue.

3.1. During the course of hearing detailed arguments have been made by Ms. Nidhi Patel, learned counsel of the assessee, assailing the order of the AO in levying the penalty u/s 271(1)(b) for alleged non-compliance of notice u/s 142(1) dated 04.09.2012, issued during the course of assessment proceedings. It has been submitted that assessee was sick company and approved by BIFR vide order dated 26.08.2008. The assessee has two directors and both are above the age of 60 years. The chemical recycling unit of the assessee was badly affected due to fire in July, 2004 and operation had to be discontinued. Further, due to negative net worth the company had to surrender its license to Reserve Bank of India. It was further submitted that income tax search had taken place in the case of company and in pursuance to the same assessment proceedings of seven years had been commenced by the Income Tax department, and the assessee company had no staff or infrastructure to take care of such a voluminous work of collection of huge details and documents for seven years and making representation before the AO. The financial condition of the company was also very bad. Under these circumstances the AO claimed to have issue notice u/s 142(1) dated 04.09.2012 fixing the date of hearing on 10th September, 2012. She submitted TO 6950/Mum/2014 4 Rajendra G. Parikh that it has not been stated by the AO before levying the penalty that the notice was duly served upon the assessee. She further submitted that in any case, the time given was too short, and after excluding Saturday and Sunday and time taken for dispatch and delivery, there were hardly two or three days available with the assessee to respond. Under such circumstances the AO did not give proper opportunity of hearing. Further, in any case, subsequently, the assessee had sincerely attended and submitted whatever details and documents were available with the assessee, which is evident from this fact that assessment order was framed u/s 143(3) and not u/s 144, and therefore, it was not a fit case for levy of penalty u/s. 271(1)(b). In support of her arguments, she relied upon the judgment of Hon’ble Supreme Court in the case of M/s. Hindustan Steel Ltd. 83 ITR 26 and judgment of Honb’le Delhi Bench ITAT in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhavan Trust vs. ADIT 115 TTJ 419 (Del.) In nutshell she submitted that the penalty order passed by the AO was unfair and factually incorrect, unjustified and contrary to law and facts, and therefore, penalty levied by the AO should be deleted.

3.2. Per contra Ld. DR relied upon the orders of the lower authorities and submitted that since there was noncompliance on the part of the assessee, therefore, penalty was rightly levied by the AO and confirmed by Ld. CIT(A).

3.3. We have gone through the facts of the case brought before us. It is noted that in pursuance to the search, the assessment proceedings of seven years were commenced by the Income Tax Department. The admitted facts on record are that the assessee company was a sick company, and was under the scheme of BIFR. We have further noted that it has been stated by the AO while levying the penalty that he had issued notice u/s 142(1) dated 04.09.2012 fixing the hearing for 10.09.2012, and since non- compliance was made by the assessee on 10.09.2012, and TO 6950/Mum/2014 5 Rajendra G. Parikh therefore, it was a fit case for levy of penalty, and accordingly, penalty was levied. We are surprised to note that the AO has no where mentioned in the assessment or penalty order that whether the impugned notice was served at all upon the assessee. It is further noted that impugned notice claim to be issued on 04.09.2012, fixed the date for hearing on 10.09.2012. If, we exclude Saturday and Sunday and the time taken for dispatch and delivery of the notice, the assessee was left with hardly two or three day time, even if the notice was duly and expediently served upon the assessee. Further there is no case made out by the AO of any other non-compliance on the part of the assessee. Rather, it is noted that subsequently details and documents were filed by the assessee to the AO on the basis of which assessment proceedings were completed and assessment order was passed u/s 143(3) and not u/s 144. Thus, it shows that subsequently, compliance has been made by the assessee. Under such circumstances, in our considered opinion without giving adequate time and without making out a case of substantive non-compliance by the assessee, it was unfair and unjustified on the part of the AO in levying the penalty u/s 271(1)(b). In the totality of the facts and circumstances of the case, we find that levy of penalty was not justified. The action of the AO is unsustainable in the eyes of law, and therefore, we direct the AO to delete the penalty.

2.1. We find that while levying the penalty u/s 271(1)(b) of the Act (as is oozing out from para-2 of the penalty order), the assessee was issued notice u/s 142(1) of the Act on 04/09/2012, fixing the compliance by the assessee on 10/09/2012. It has not been mentioned as to when the notice was served upon the assessee. It is also TO 6950/Mum/2014 6 Rajendra G. Parikh noted that during that period, as explained before us, the assessee was suffering from ailment, meaning thereby, sufficient time/opportunity for compliance was not provided to the assessee. This is clearly violation of principle of natural justice on the part of the Revenue. It is noted that the Tribunal in the aforesaid order dated 18/02/2016 has made an elaborate discussion on identical fact including the decision from Hon’ble Apex Court in M/s Hindustan Steel Ltd. 83 ITR 26 and the case of the assessee Delhi Bench of the Tribunal in Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs ADIT 115 TTJ 419 (Del.). If we exclude the Saturday and Sunday, falling within the given time in the notice, time taken for dispatch and delivery of the notice hardly two or three days left with the assessee. It is noted that the ld. Assessing Officer has not made a good case for non compliance on the part of the assessee. Considering the totality of facts and the circumstances narrated before us, we direct the ld. Assessing Officer to delete the penalty, imposed upon the assessee. Thus, the impugned appeals are allowed.

Finally, the appeals of the assessee are allowed.

This order was pronounced in the open court in the presence of Ld. representatives from both sides at the conclusion of the hearing on 20/06/2016.