Case Law Details
Balram Kumar Mahendra Vs ITO (ITAT Delhi)
The case involved appeals by Balram Kumar Mahendra and Prem Mahendra against the penalty levied under Section 271(1)(b) of the Income Tax Act, amounting to ₹10,000 each. The Assessing Officer imposed the penalty for non-compliance with notices under Section 143(2) and subsequent show-cause notices. The appellants argued that they did not receive the notices, as they were sent to an outdated address. Before the Commissioner of Income Tax (Appeals) [CIT(A)], they contended that their address had changed due to medical reasons, and the tax department was aware of their new address. However, the CIT(A) upheld the penalty, stating that the notices were sent to the address provided in the income tax return, and no official intimation regarding the change of address was made to the department.
The Income Tax Appellate Tribunal (ITAT) Delhi ruled in favor of the appellants, emphasizing that penalty under Section 271(1)(b) is not automatic and can be waived under Section 273B if a reasonable cause exists. The tribunal accepted that non-receipt of notices due to an address change constituted a reasonable cause for non-compliance. Citing the Supreme Court ruling in Hindustan Steel Ltd. vs. State of Orissa, ITAT highlighted that penalty should not be imposed when non-compliance is due to a technical or unintentional failure rather than deliberate disregard of statutory obligations. As a result, the penalties were deleted, and the appeals were allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
These appeals are filed by the respective assessees who are husband and wife, against the respective orders of the Ld. Commissioner of Income Tax (Appeals) confirming the levy of penalty u/s 271(1)(b) of the IT Act amounting to Rs. 10,000/- each.
2. Since the issues are common and the appeals were heard together. These are being consolidated and disposed of together for the sake of convenience.
3. The assessees in these cases filed the Income Tax Return on 31.10.2005, the same was processed u/s 143(1) on 4.7.2006. Notice u/s 143(2) was issued on 9.2006 in the case of Shri Balram Kumar Mahendra fixing the case for 24.10.2006. The notice u/s 143(2) was again issued on 31.5.2007 fixing the case for 13.6.2007 but no one attended. Show cause penalty notice u/s 271(1(b) was issued on 28.6.2007 fixing the case for 31.7.2007, but no reply was received. Under these circumstances, the Assessing Officer held that the assessee was at fault for non-compliance of hearing on 31.7.2007. Hence, he levied the penalty of Rs. 10,000/- u/s 271(1)(b) of the IT Act.
3.1 In the case of Ms. Prem Mahendra notice u/s 143(2) was issued on 1.2.2007 fixing the case for 22.2.2007. Thereafter, another notice was issued under section 143(2) on 31.5.2007, fixing the case for 14.6.2007, but no one attended. Show cause penalty notice u/s 271(1(b) was issued on 28.6.2007 fixing the case for 31.7.2007, but no reply was received. Under these circumstances, the Assessing Officer held that the assessee was at fault for non-compliance of hearing on 31.7.2007. Hence, he levied the penalty of Rs. 10,000/- u/s 271(1)(b) of the IT Act.
4. Before the Ld. Commissioner of Income Tax (Appeals) the assessee stated that notice dated 31.5.2007 had been sent at an old address and therefore, not Ld. Commissioner of Income Tax (Appeals) did not accept this contention of the assessee by holding that the address on which notice was sent was the same as that given in the return of income. Any change in address was subsequently not intimated to the Assessing Officer. Hence, he confirmed the levy of penalty.
5. Against this order both the assesses are in appeal before us.
6. Before us ld. counsel of the assessee submitted that non-receipt of notice was the reason for the assessee’s non-apperance and this is reasonable cause u/s 273B of the IT Act. In this regard, he referred to the Hon’ble Jurisdictional High Court in the case of Woodward Governor India P Ltd. vs. C.I.T. (2002) 253 ITR 745 (Del) wherein it was held that the levy of penalty is not automatic and the absence of a reasonable cause is necessary. He further submitted that since the first notice was sent at the new address, the Assessing Officer very much knew the assessees’ new address and which was on record in both the cases. The assessees had shifted to their daughter’s house in East Patel Nagar, New Delhi for the post operative care of Ms. Prem Mahendra and had duly informed the post office and their neighbours. The department had got the new address of the assessee as earlier notice dated 15.9.2006 seeking details were sent at the new and correct address.
6.1 Ld. Departmental Representative on the other hand relied upon the orders of the authorities below.
7. We have heard both the counsel and perused the records. We find that penalty in this case has been levied u/s 271(1)(b) of the IT Act. This section mandates levy of penalty for inter-alia not complying with the notice issued u/s 142(1) or 142(3). Section 273B of the IT Act provides that inter-alia penalty u/s 271(1)(b) need not be imposed, if it is proved that there was a reasonable cause for the said failure of the assessee to comply with the provisions of section 271(1)(b). In this case we find that non-appearance of the assessees before the Assessing Officer was caused by non-receipt of the notice. This in our considered opinion can be construed as reasonable cause u/s 273B for noncompliance by the assesses.
8. Under such circumstances, rigors of penalty u/s 271(1)(b) are not attracted in the case of the assessee. In this regard, we place reliance from the Apex Court decision rendered by a larger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in 83 ITR 26 wherein it was held that “An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and 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 of its obligation. Penalty will not also be imposed merely because it is lawful to do 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 provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute.”
9. In the background of the aforesaid discussion and precedent, we set aside the orders of the authorities below and delete the levy of penalty.
10. In the result, both the appeals field by the assesses are allowed.
Order pronounced in the open court on 31/5/2010 upon conclusion of hearing.
Author Bio
