Case Law Details

Case Name : Mr.Lakhamshi J. Gala Vs DCIT (ITAT Mumbai)
Appeal Number : ITA No 109.MUM/2014 to 115/MUM/2014
Date of Judgement/Order : 09/06/2015
Related Assessment Year :
Courts : All ITAT (5168) ITAT Mumbai (1632)
Brief of the case:  ITAT Mumbai held in J. Gala Vs DCIT that for levying the penalty u/s 271(1)(b) revenue has to give a reasonable opportunity of being heard to the assessee, without which penalty could not be levied. Further for giving reasonable opportunity of being heard, AO should give a separate notice to the assessee that failure to reply by the assessee penalty u/s 271(1)(b) would be levied.

Moreover initializing the penalty in the same order through which AO was calling for some information from the assessee would not be sufficient, separate order to initiate the penalty has to be given by the AO so that reasonable opportunity of being heard could be given to the assessee.

Facts of the case:  AO issued several notices u/s 142(1) to the assessee for providing some information called by the AO in which it was written that if the assessee failed to provide the information before the AO, penalty u/s 271(1)(b) would be levied but assessee did not provide any information to the AO, if provided it was not complete. So AO levied penalty u/s 271(1)(b) on the basis that even after regular reminders and lot of notices. assessee was unable to present himself on the hearing date and provide information.

Contention of the assessee:  Assessee was of the view that he had not got any show cause notice for levying of penalty u/s 271(1)(b) so the levying of penalty by the AO was void because reasonable opportunity to heard was not given to the assessee and as per sec 274 for levying penalty reasonable opportunity of being heard should be given to the assessee and issue of notice u/s 142(1) for calling of information was not sufficient show cause notice to levy penalty u/s 271(1)(b).

Contention of the revenue:  Revenue was of the view that it had issued notice u/s 142(1) for calling of information from the assessee and it was clearly mentioned in the notice that if the assessee failed to reply this notice or failed to provide information penalty u/s 271(1)(b) would be levied. Moreover AO had issued lot of notices several times which assessee failed to rely so considering the times of reasonable opportunity given to the assessee and failure of assessee to respond to that, AO levied penalty u/s 271(1)(b).

Held by ITAT:  ITAT held that AO should give show cause notice to the assessee asking the reasons for non-replying to the notices issued u/s 142(1) which AO failed to do so. Moreover initializing the penalty u/s 271(1)(b) within the notice issued u/s 142(1) was not a sufficient opportunity of being heard to the assessee. Separate notice was required to be issued to the assessee to clearly give opportunity of being heard to the assessee asking for the response why the penalty should not be levied if the assessee failed to respond to the notice issued u/s 142(1).Incorporating the clause of penalty u/s 271(1)(b) in the notice issued u/s 142(1) was not sufficient, separate notice was required which AO failed to do so penalty u/s 271(1)(b) could not be levied .

Appeal of assessee was allowed.

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Category : Income Tax (27495)
Type : Judiciary (11695)
Tags : ITAT Judgments (5352) Rishabh Mehra (100)

One response to “Penalty U/s 271(1)(b) cannot be imposed without giving reasonable opportunity of being heard to Assessee”

  1. chetan says:

    In u/s 271(1)(b) there is any imprisonment

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