Penalty u/s 271B of Income Tax Act shall not be imposed unless Assessee has been given a Reasonable Opportunity of being heard: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty under Section 271B of the Income Tax Act, 1961 shall not be imposed unless the assessee has been given a reasonable opportunity of being heard.

The assessee company filed its return of income declaring NIL income. The case of the assessee was selected for scrutiny and an inquiry, with reference to the following amounts received from the directors, was made. Neither any of the principal officers of the company nor the Authorized Representative furnished the relevant details. Ultimately, resulting in an addition of Rs. 6.28 lakhs.

The Appellant comprises 3 Directors namely (1) Shri H K Hinduja, who suffered a heart ailment requiring hospitalization (2). Smt Maya H. Hinduja a super senior citizen, requiring constant attention and support (3) Shri Mahesh H. Hinduja, now a Non-Resident, who shifted from India to the USA.

That Appellant had discontinued its business, and had informed the Registrar of Companies, of this fact; and that said Companies office had deleted the Company's name from its Register of Companies. The Company had been "struck off" from the registrar of the company, vide Extract of Gazette.

The Assessee’s Chartered Accountant had attended before the Assessing Officer and informed him of all the Facts and explained to him, that due to adverse circumstances, the Assessee was not able to give information.

The Assessing Officer arrived at an adverse conclusion against the Applicant, though in fact, the Applicant was suffering, the business had been discontinued, the premises had been surrendered, and the Appellant was compelled to place its books, etc. at known friend's industrial factory, in a trunk for the purpose of safety.

In the great flood of 2005, the factory premises got flooded and the Applicant's books, etc. lying in the truck were destroyed. The Assessing Officer failed to appreciate these circumstances and decided to punish the Appellant.

The Two-member bench comprising of Amit Shukla (Judicial member) and Gagan Goyal (Accountant member) observed that quantum appeal is still pending before the Commissioner of Income Tax (Appeal) [CIT(A)] and the business of the assessee is discontinued long before as mentioned and was duly communicated to the Assessing Officer during the penalty proceedings.

As far as the levy of penalty under Section 271B of the Income Tax Act is concerned, the bench found that with the factual matrix reproduced, the case of the assessee clearly deserves to be considered under Section 274 of the Income Tax Act wherein it is provided that if assessee is able to establish the reasonable cause behind its failure, no penalty can be imposed. Therefore, the penalty imposed is directed to be deleted and the appeal of the assessee was allowed.

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