Penalty u/s 271(1)(b) can not be imposed for non compliance of notice under section 148 – ITAT

Penalty u/s 271(1)(b) can not be imposed for non compliance of notice issued under section 148 – ITAT

ABCAUS Case Law Citation:
ABCAUS 2400 (2018) 07 ITAT

The instant appeal was filed by the assessee against the order of the CIT-Appeals in upholding the action of the Assessing Officer (AO) in imposing penalty under section 271(1)(b) of the Income tax Act, 1961 (the Act) for non compliance of Income Tax Notice.

The assessee was an agriculturist who had sold agricultural land. The AO issued notice under section 148 of the Act on the basis of information received from Sub Registrar about the sale of agricultural land.

The notice issued under section 148 was served through affixture. Thereafter, notice under section 142(1) was issued. Since there was no response and compliance on behalf of the assessee to the notices issued by the AO, accordingly the AO framed the assessment under section 147 read with section 144 of the Act and initiated penalty proceedings under section 271(1)(b) by issuing notice.

The AO levied penalty of Rs. 10,000/- each for failure on notices issued under section 148 and 142(1) of the Act total amounting to Rs. 20,000/-. The assessee challenged the action of the AO before the ld. CIT (A) but could not succeed.

Before the Tribunal, the assessee contended that the penalty under section 271(1)(b) can be imposed by the AO if he is satisfied that any person failed to comply with the notice under section 142(1) or under section 143(2) or directions issued under section 142(2A) of the Act. Therefore, no penalty can be levied under section 271(1)(b) for non compliance of notice issued under section 148.

Regarding non compliance of notice issued under section 142(1), it was submitted that since the assessee shifted his residence from the place as given in the Sale Deed, therefore, the notices issued by the AO could not be served on the assessee. The assessee in the appellate proceedings furnished the relevant documents to show that the assessee shifted his residence and, therefore, in the absence of service of notice issued by the AO, the assessee could not comply with the notice under section 142(1).

The Tribunal observed that the assessee was not regularly assessed to tax. The AO had recorded in the order that the notice issued under section 148 was served through affixture as the assessee was not available at the place of address. Further, the notice issued under section 142(1) was also not served on the assessee and, therefore, there was no compliance by the assessee to the notice issued under section 142(1). The assessment was framed under section 147 read with section 144. Even during the penalty proceedings, none has appeared on behalf of the assessee and the AO has stated in the order that the notice was refused to be received. Even the Inspector also reported that assessee has refused to take notice though none of the reports of the Postal Authorities or the Inspector has stated that the assessee was available at the place and assessee refused to receive the notice.

The Tribunal further observed that the assessee had explained the fact that he had shifted his place of residence and, therefore, he could not receive the notice issued by the AO. As regards the penalty for non compliance of notice under section 148, the provisions of section 271(1)(b) cannot be invoked for non compliance of notice under section 148. The AO while passing the order under section 271(1)(b) had mentioned both section 148 and 142(1) towards non compliance.

The ITAT opined that clearly, the AO had levied the penalty @ Rs. 10,000/- each for non compliance of notices under section 148/142(1) of the Act. As it was clear from the provisions of section 271(1)(b) that this provision can be invoked only for non compliance of notice under section 115WD(2) or section 115WE(2) or section 142(1) or 143(2) or directions issued under section 142(2A) of the Act, therefore, other than the default committed by the assessee specified in the clause (b) of section 271(1) the non compliance to the other notices or directions would not attract the penalty under section 271(1)(b) of the Act. Accordingly, the penalty levied under section 271(1)(b) for non compliance of notice under section 148 is not valid and the same was deleted.

As regards the penalty levied for non compliance of notice under section 142(1), the Tribunal opined that the assessee was not served with any of the notices issued by the AO due to the change of address and since the assessee had not filed any return of income, therefore, the AO was not having the present address of the assessee. Hence when the notice issued under section 142(1) was not served upon the assessee, and the AO had not conducted further enquiry regarding the current address of the assessee then in the facts and circumstances of the case that the assessee had already furnished the current address in the quantum proceedings, the reasons explained by the assessee were bonafide and reasonable.

Accordingly, the ITAT deleted the penalty imposed under section 271(1)(b) of the Act for non compliance of section 142(1).

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