Facts of the Case

The assessee filed multiple appeals before the Delhi High Court challenging the orders of the Income Tax Appellate Tribunal (ITAT), which had upheld the imposition of penalty under Section 271(1)(b) for failure to comply with notices issued under Section 142(1) of the Income Tax Act.

The case originated from information received from French authorities indicating that the assessee was allegedly linked to a Swiss bank account in HSBC Bank. The assessee was required to furnish bank account details and submit a consent-cum-waiver form enabling authorities to obtain information from foreign banks.

The assessee denied any association with the said account and failed to comply with the notice, resulting in penalty proceedings.

Issues Involved

  1. Whether non-compliance with notice under Section 142(1) attracts penalty under Section 271(1)(b).
  2. Whether penalty survives when protective assessment is deleted.
  3. Whether requiring submission of consent form violates Article 21 of the Constitution.
  4. Whether denial of connection with foreign bank account justifies non-compliance.

Petitioner’s Arguments

  • The assessee contended that she had no connection with the alleged Swiss bank account and was therefore not required to submit the consent form.
  • It was argued that since the protective assessment was deleted by CIT(A), penalty could not be sustained.
  • The assessee relied on Selvi & Ors. vs State of Karnataka to contend that compelling such compliance violated Article 21.
  • It was also submitted that penalty proceedings against her husband had been dropped in similar circumstances.

Respondent’s Arguments

  • The Revenue argued that the assessee failed to comply with statutory notices issued under Section 142(1).
  • It relied on the precedent in the case of Sanjay Dalmia, where penalty under Section 271(1)(b) was upheld in identical circumstances.
  • It was contended that compliance with statutory notices is mandatory irrespective of the ultimate tax liability.

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 would have been no prejudice in complying with the notice.
  • The Court followed its earlier decision in the case of Sanjay Dalmia where similar penalty was upheld.
  • The reliance on Article 21 and Selvi case was rejected as not applicable to tax proceedings.
  • The Court concluded that no substantial question of law arose and dismissed all appeals.

Important Clarifications

  • Penalty under Section 271(1)(b) is independent of assessment proceedings.
  • Deletion of protective assessment does not eliminate liability for non-compliance.
  • Compliance with statutory notices is mandatory even when the assessee disputes the underlying facts.
  • Article 21 protection cannot be invoked to avoid compliance in tax proceedings.
  • Consistency in judicial approach is maintained where identical facts exist (same bank account and related parties).

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:909-DB/MMH09032022ITA372022_151509.pdf

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