Facts of the Case

The present appeals were filed by the assessee challenging orders passed by the Income Tax Appellate Tribunal (ITAT), which upheld penalty imposed under Section 271(1)(b) for non-compliance with notices issued under Section 142(1) of the Income Tax Act.

The case arose after information was received from French authorities indicating that the assessee was associated with a foreign bank account in HSBC Bank, Switzerland. The assessee was required to furnish details of the bank account and submit a consent-cum-waiver form enabling tax authorities to obtain information from foreign banks.

The assessee denied being an account holder and did not comply with the notice requirements, leading to the imposition of penalty.

Issues Involved

  1. Whether non-compliance with notice under Section 142(1) justifies penalty under Section 271(1)(b).
  2. Whether penalty can be sustained when protective assessment has been deleted.
  3. Whether requiring submission of a consent form violates Article 21 of the Constitution.
  4. Whether absence of direct connection with foreign bank accounts absolves the assessee from compliance.

Petitioner’s Arguments (Assessee)

  • The assessee contended that she was not connected with the alleged Swiss bank account and hence was not obligated to submit the consent form.
  • It was argued that the protective assessment had already been deleted by the CIT(A), and therefore no penalty could survive.
  • The assessee relied on the Supreme Court judgment in Selvi & Ors. vs State of Karnataka to argue that compelling submission of such consent violated Article 21.
  • It was also highlighted that penalty proceedings against the assessee’s husband had been dropped.

Respondent’s Arguments (Revenue)

  • The Revenue contended that the assessee failed to comply with statutory notices issued under Section 142(1).
  • It was argued that similar facts had already been adjudicated in the case of Sanjay Dalmia, where penalty under Section 271(1)(b) was upheld.
  • Non-compliance with statutory notices, irrespective of ultimate tax liability, attracts penalty.

Court’s Findings / Order

  • The Delhi High Court upheld the penalty imposed under Section 271(1)(b) for non-compliance with notice under Section 142(1).
  • The Court held that even if the assessee had no connection with the foreign account, there was no prejudice in complying with the notice and submitting the consent form.
  • The Court relied on its earlier decision in Sanjay Dalmia case, where similar penalties were upheld.
  • The argument based on Article 21 was rejected, holding that the judgment in Selvi case was not applicable to tax proceedings.
  • The Court concluded that no substantial question of law arose and dismissed the appeals.

Important Clarifications

  • Deletion of protective assessment does not automatically nullify penalty for non-compliance.
  • Compliance with statutory notices is mandatory regardless of the assessee’s claim of non-involvement.
  • The right against self-incrimination under Article 21 does not extend to routine tax compliance requirements.
  • Penalty under Section 271(1)(b) is procedural and independent of final tax liability determination.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:909-DB/MMH09032022ITA372022_151509.pdf

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