INCOME TAX ACT, 1961

Section 271(1)(b)

Penalty under section 271(1)(b) - Non-compliance of notice - Leviability of -

AO levied penalty under section 271(1)(b) for non-compliance to two notices i.e., notice under section 142(1) and subsequent notice under section 142(1). Further, CIT (A) reduced the said penalty to Rs. 10,000 for the reason that subsequent default was continuation of the initial default and penalty could not be levied for each and every default. Held: It was found that during course of penalty proceedings, assessee was issued a show-cause, and in response, the assessee submitted that she filed an appeal against the assessment order and accordingly, the matter might be adjourned till disposal of such appeal. However, the AO didnot accept the assessee's contention and proceeded with levy of penalty under section 271(1)(b). As the assessee's contention to keep the penalty proceedings in abeyance till disposal of appeal, was not found acceptable to the AO, the assessee should have been allowed another opportunity to put worth her contentions on merits of levy of penalty. However, the AO passed the penalty order without providing any such opportunity to the assessee. Further, there was no independent finding recording by the AO while levying the penalty and merely referring to the findings in the assessment order, he arrived at a conclusion that the assessee had willfully not complied with the notices and not co-operated in finalizing the assessment proceedings. Accordingly, the penalty under section 271(1)(b) could not be sustained.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

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