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Income Tax Appellate Tribunal, “J”, BENCH MUMBAI
Before: SHRI PRAMOD KUMAR, AM & SHRI PAWAN SINGH, JM
Date of Hearing : 11/01/2016 Date of Pronouncement: 13/01/2016 O R D E R
PER PAWAN SINGH, JM:
This appeal is filed by the assessee challenging the order of correctness of order u/s 271(1)(b) for levying penalty of Rs. 50,000/- which was approved by the CIT(A)-33, Mumbai, in the impugned order dated 21/03/2014.
The brief facts of the case are that the assessee filed his return of income on 17.10.2008 and the return of income was selected for scrutiny. As per the contents of assessment order a statutory notice u/s 142(1) was issued on 30.06.2008 for fixing the hearing on 15.07.2008 and nobody attended the date of hearing nor any request for adjournment. Another notice u/s 142(1) was issued on 06.08.2008 for 21.08.2008 and none appeared on behalf of the assessee, again a notice was issued for fixing the date on 06.10.2008 and finally for 06.10.2008, and finally for 04.12.2008, but the assessee not appeared and thus the proceeding was held ex-parte u/s 144 and assessment order was passed on 15.12.2008, assessing the total income of the assessee as of Rs. 10,26,760/-. 3. Thereafter, the assessee was issued notice u/s 274 r.w.s. 271(b) on 18.12.2008 to show cause within 7 days of service of notice as to why the penalty be not inflicted for which no reply was filed , the notice was allegedly served on 31.12.2008 and final notice dated 12.03.2012, for levying the penalty was sent, thus for six defaults i.e. five defaults for not responding the notice u/s 142(1) and one default for notice u/s 143(2) penalty @ Rs. 10,000/- each was thus inflicted a penalty of Rs. 60,000/-, vide order dated 28.03.2012 against which appeal was filed by the assessee before the CIT(A).
The CIT(A) while disposing of the appeal of the assessee restricted it only in respect of 5 instances of non-compliance and thus deleted Rs. 10,000/- out of Rs. 60,000/- and confirmed the penalty of Rs. 50,000/- and thus partly allowed the appeal of the assessee vide order dated 31.03.2014, against which the present appeal is filed before us.
We have heard the assessee in person and Departmental Representative (DR) for the revenue. The assessee has argued that has not received only one notice and during the relevant period the assessee was seriously ill and when received notice, he appeared on that date during the relevant period and was not in a position to engaged the representative. The assessee could not disclose such date before us, but argued that he personally appeared before the Assessing Officer (AO).
The assessee further argued that that he is a small businessman and lenient view will be taken against him as he never intended to disobey or disregard with the notice issued by the authorities below and further undertake that he will not make any default in response to the notices of the authorities below.
The DR of the revenue argued that the assessee does not deserve any leniency and the order passed by the authorities below does not require any interference.
We have considered the rival contentions of the parties and perused the material available on record. The assessee has explained that he was seek during the relevant period and was not in position either to attend the proceeding personally or engage representative to appear before the authorities concerned.
We have perused the section 271(1)(b) of the Income-tax Act and we understand that anything contained in the provision of clause (b) of sub-section (1) of section 271, no penalty shall be imposed on the person or the assessee as the case may be, for any failure if proved that there was any reasonable cause for the said failure. So it could be understand that penalty cannot be imposed if assessee is able to prove that there was a reasonable cause for the said failure of not complied with the notice served upon them.
The Co-ordinate bench of Delhi Tribunal, in the case of Wodward Governor India P. Ltd. Vs. CIT and ors. (2002) 253 ITR 745 (Delhi) para 5 & 6 which are reproduced here has held: "What would constitute reasonable cause cannot be laid down with precision. It would depend upon factual background and the scope for extremely limited and unless the conclusions are perverse based on conjectures or surmises and/ or have been arrived at without consideration of relevant material and/ or have been arrived at without consideration of no scope for interference. Reasonable cause, as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. The expression "reasonable" is not susceptible of a clear and precise definition; for an attempt to give a specific meaning to the word not space. It can be described as rational according to the dictates of reason and is not excessive or immoderate. The word "reasonable" has in law the prima facie meaning of reasonable with regard to those circumstances of which the actor, called on to act reasonably, knows or ough6t 0 know (see In re, A Solicitor (1945) KB 368 (CA).Reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary produce, acting under normal circumstances, without negligence or inaction or want of bona fides."
In the case of Azadi Bachao Andolan v. Union of India 252 ITR 471 (Delhi), Delhi, the Hon'ble High Court held: "Section 273B starts with a non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271C, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure A clause beginning with "notwithstanding anything" is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision of Act mentioned in the non obstante clause (see Orient Paper and Industries Ltd v State of Orissa, AIR 1991 SC 672) A non obstante clause may be used as a legislative device, to modify the ambit of the provision of law mentioned in the non obstante clause, or to override it in specified circumstances (see T R Thandur v Union of India, AIR 1996 SC 1643) The true effect of the non obstante clause is that in spite of the provision or Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment (see Smt Parayankandiyal Eravath Kanapravan Kalliani Amma v K Devi, AIR 1996 SC 1963) Therefore, in order to bring in application of section 271 C in the backdrop of section 273B, absence of reasonable cause, existence of which has to be established by the assessee, is the sine qua non Levy of penalty under section 271C is not automatic Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause The initial burden is on the assessee to show that there existed reasonable cause which wag the reason for the failure referred to in the concerned provision Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause 'Reasonable cause" as applied to human
action is that which would constrain a person of average intelligence and ordinary prudence It can be described as probable cause It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences follow The above being the position, the Commissioner's non-consideration of the plea raised by the assessee about the existence of reasonable cause vitiated the order On that score, we find the order passed by the Commissioner to be non- maintainable.?
In the case in hand the assessee has explained the sufficient cause for not appearing when the case was fixed as no notice was served upon him except for one occasion for which he has honestly conceded that except on one occasion the assessee has not appeared before the AO, nor could submit any detail as sought due to his illness and pleaded leniency and undertook to be vigilant in future for appearing before the authorities concerned. In view of the above discussion, the we consider it appropriate to set aside the order of AO and delete the entire penalty in the order dated- 28.03.2012..
In the result, appeal filed by the assessee is accepted and the order of AO dated 28.03.2012 is set-aside.
Order pronounced in the open court on this 13/01/2016.