No Penalty u/s 271(1)(b) of Income Tax Act for  Failure to Sign on “Consent Letter” not Authorized by the Government: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no penalty should be levied under Section 271(1)(b) of the Income Tax Act, 1961 for failure to sign a consent letter which was not authorized by the government.

Rohit Jain counsel appeared for the assessee and Mohd. Gayasuddin Ansari, counsel appeared for the revenue.

Assesee Krishan Kumar Modi filed the above appeal against the order of CIT(A).

When a search and seizure operation was carried out in the premises of the assessee by the income tax department, notice under Section  153A of the Income Tax Act was issued to file return of income within 19 days from the service of notice.

During the course of assessment proceedings, a notice under Section 142(1) was issued to the assessee for  seeking certain information/documents from the assessee relating to his foreign bank accounts and consequently the assessee did not file the requisite “consent letter” vide notice under Section 142(1) of the Income Tax Act.

Consequently, a show-cause notice was issued to the assessee for imposing penalty under Section 271(1)(b) of the Income Tax Act. After receiving the explanation AO imposed the penalty under Section  271(1)(b) for non-compliance of information being sought under Section  142(1) of the Income Tax Act.

Aggrieved the assessment order assessee filed appeal before CIT(A). The CIT(A) confirmed the order of AO.

CIT(A) held that the purpose of the penal provision contained in Section 271(1)(b) Income Tax Act is to ensure compliance to tax enquiry/investigation. This penalty is attracted where there is failure to comply with notices under Section 142(1) or under Section 143(2) Income Tax Act.

Further  purpose of the penal provision contained in Section 271(1)(b) of the Income Tax Act is to ensure compliance to tax investigations and since the assessee, having failed to sign the "consent form" and having no reasonable cause to do so, has violated the said provision.

Thereafter the assessee filed the present appeal before the tribunal.

During the proceedings tribunal observed that assessee involving the deposits in the foreign bank account of HSBC bank also similar issue of levy of penalty under Section 271(1)(b) Income Tax Act for not signing the concerned form has been deleted by the Coordinate Bench of Tribunal in the case of Shyam Sunder Jindal.

It was further observed that penalty could not be levied if there is a reasonable cause.

The two member bench of C. M. Garg, (Judicial Member) and Dr. B. R. R. Kumar, (Accountant Member) after verifying the facts, deleted the penalty imposed by the lower authorities.

To Read the full text of the Order CLICK HERE

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