Facts of the Case

The assessee, Smt. Amita Rajvedi, was subjected to assessment proceedings during which statutory notices were issued requiring compliance. Due to non-appearance and failure to comply with certain notices, the Assessing Officer levied penalties under Section 271(1)(b) of the Income-tax Act for each instance of default.

The assessee explained that the non-compliance occurred because the Chartered Accountant representing the case was suffering from illness and could not appear before the Assessing Officer. The matter was carried in appeal before the Commissioner of Income Tax (Appeals), and subsequently before the Income Tax Appellate Tribunal, Allahabad Bench.

Issues Involved

  1. Whether the penalty under Section 271(1)(b) for non-compliance with notices was justified.
  2. Whether the assessee had demonstrated “reasonable cause” for the default.
  3. Whether illness of the authorized representative could excuse non-appearance.
  4. Whether penalty provisions should be applied strictly or with consideration of circumstances.

Petitioner’s (Assessee’s) Arguments

  • The failure to comply with notices was not deliberate or willful.
  • The authorized representative (Chartered Accountant) was seriously ill and unable to attend proceedings.
  • The assessee had no intention to obstruct assessment proceedings.
  • Under Section 273B, penalty cannot be imposed where reasonable cause is established.
  • Therefore, the penalties were liable to be deleted.

Respondent’s (Revenue’s) Arguments

  • Statutory notices were duly served and required compliance.
  • Failure to appear constituted default attracting penalty under Section 271(1)(b).
  • The Assessing Officer acted within statutory authority.
  • The penalties were justified to enforce compliance with assessment proceedings.

Court Order / Findings (ITAT)

  • Penalty under Section 271(1)(b) is not automatic.
  • Where the assessee demonstrates a reasonable cause for non-compliance, penalty cannot be sustained.
  • Illness of the authorized representative constitutes a valid and genuine reason.
  • Absence due to circumstances beyond control negates the element of deliberate default.

Important Clarification by the Tribunal

  • Penalty provisions are penal in nature and must be construed strictly.
  • Authorities must consider bona fide explanations before imposing penalties.
  • The objective is to ensure compliance, not to punish unavoidable lapses.

Link to download the order  https://itat.gov.in/public/files/upload/1658812089-ita%20no.%2064%20to%2067%20Alld%202020%20new.pdf

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