No penalty u/s 271(1)(b) leviable in case of change of counsel resulting in non compliance – ITAT

No penalty u/s 271(1)(b) leviable in the case of change of counsel resulting in non compliance of notices- ITAT deleted penalty

ABCAUS Case Law Citation:
ABCAUS 2603 (2018) (11) ITAT

The instant appeal was filed by the revenue against the order of the CIT(A) in confirming penalty imposed u/s 271(1)(b) of the Income Tax Act, 1961 (the Act) for non compliance of notices issued u/s 142(1) of the Act.

During the assessment proceedings, the AO issued the notice under section 143(2). Later, on two occasions, notices under section 142(1) were issued by the AO along with some queries, but no compliance was made by the appellant on the dates fixed for hearing.

Consequently the AO issued a notice under section 271(1)(b) calling for the appellant’s explanation regarding the non-compliances. However even to penalty show cause notice, no response was made by the appellant or his authorized representative on the date fixed.

Consequently, a Penalty of Rs. 10,000/- under the provisions of section 271(1)(b) of the Act was imposed by the AO vide the impugned order. Later, another notice under section 142(1) was issued which was also not complied-with by the appellant. Consequently the AO issued another notice under section 271(1)(b) calling for the appellant’s explanation which also remained un-responded. As a result the AO imposed a second penalty, again of Rs. 10,000/-, under the provisions of section 271(1)(b) of the Act.

During the appellate proceedings before the CIT(A), the appellant stated that the main reason for these non-compliances was that his earlier counsel Advocate, did not attend the assessment proceedings and did not represent his case properly.

The assessee tried to prove this statement by stating that two other counsels were engaged by him because of the improper services given by his earlier counsel. The assessee also filed an affidavit in support of his explanation.

However the CIT(A) dismissed the appeal.

The Tribunal observed that the CIT(A) had denied the acceptance of the assessee’s contention that the main reason for non compliance of the notice was change of counsel of the assessee.

In this regard, the Tribunal noted that that the assessee had correctly placed reliance on the order passed by the Delhi Bench of the Tribunal where It had been held that in the case of change of counsel, which fact was not disputed in the present case also, no penalty u/s 271(1)(b) of the Act is leviable.

The Tribunal accordingly, deleted both the penalties

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