The Surat Bench of the Income Tax Appellate Tribunal (ITAT) deleted penalties levied on seven assessment years due to non-compliance citing all notices served in a short period and upheld only one relevant default year penalty.
Dimki Hemang Jhaveri (assessee), a search action was carried out on residential premises of assessee. Several incriminating documents were found and seized. The assessee was issued with notice to file Income Tax Return. Therefore the assessee filed Income Tax return. The assessing officer AO issued a notice seeking details for seven assessment years within 5 days.
Law and Procedure for Filing of Appeals
The AO completed Assessment and the assessee failed to supply documents due to shortage of time. However, AO levied Penalty for all seven years by treating it as single default at Rs. 10,000 per year which amounts to Rs. 70,000 for seven years.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Tax [appeals] CIT(A). The CIT(A) deleted the Quantum of assessment but confirmed the penalty levied by the AO for seven years.
Aggrieved by the order, the assessee filed seven separate appeals before ITAT. The tribunal clubbed the appeals and decided the matter by common order. The counsel for assessee argued that there was only one default and therefore penalty can be levied only for the one default. He also contended that AO was very harsh in levying penalties.
The counsel for revenue relied on lower authorities order and stated that the CIT(A) considered all submissions by the assessee before confirming the penalty. The counsel prayed to dismiss all appeals.
Law and Procedure for Filing of Appeals
The two member bench comprising Pawan Singh (Judicial Member) and Bijayanandha Pruseth (Accountant Member) observed that it was undisputed fact the assessee not complied nor sought adjournment to the notice. The tribunal also observed it as a single default and penalty levied for seven times.
Therefore the tribunal held that it was unreasonable to levy seven penalties for single default. The tribunal also upheld a single penalty for the Assessment Year 2012-2013 and deleted all other penalties for remaining assessment years 2013-2014 to 2018-2019.
The tribunal also clarified that only the penalty was deleted but assessment proceedings were not quashed. The appeal related to AY 2012-2013 was dismissed. The remaining appeals were allowed.
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