Facts of the Case

The present appeals were filed by the assessee challenging the orders of the Income Tax Appellate Tribunal (ITAT), which upheld the imposition of penalty under Section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with notices issued under Section 142(1) of the Act.

The case arose after the Revenue received information from French authorities indicating that the assessee was associated with a Swiss bank account in HSBC Bank. The assessee was required to:

  • Furnish account opening details
  • Provide bank statements
  • Submit a consent/waiver form enabling authorities to obtain foreign bank information

The assessee denied any connection with such bank accounts and did not comply with the notice.

Issues Involved

  1. Whether penalty under Section 271(1)(b) can be imposed for non-compliance with notice under Section 142(1).
  2. Whether refusal to submit a consent/waiver form for obtaining foreign bank details is justified.
  3. Whether deletion of protective assessment eliminates liability for penalty.
  4. Whether such requirement violates Article 21 of the Constitution of India (right to privacy/right to silence).

Petitioner’s Arguments

  • The assessee contended that she had no connection with the Swiss bank account, hence she 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.
  • Reliance was placed on Selvi & Ors. vs State of Karnataka (2010) 7 SCC 263, arguing that compelling submission of consent violates Article 21.
  • It was further submitted that similar penalty proceedings against her husband had been dropped.

Respondent’s Arguments

  • The Revenue argued that non-compliance with statutory notice under Section 142(1) itself attracts penalty under Section 271(1)(b).
  • It was emphasized that the assessee failed to cooperate despite repeated opportunities.
  • Reliance was placed on earlier decisions, particularly in the case of Sanjay Dalmia, where penalty for similar non-compliance was upheld.

Court’s Findings / Order

The Delhi High Court dismissed the appeals and upheld the penalty, holding that:

  • If the assessee had no connection with the foreign bank account, no prejudice would have been caused by complying with the notice and submitting the consent form.
  • The judgment in Selvi case was held inapplicable, as it pertained to criminal proceedings and the right against self-incrimination.
  • The Court relied on its earlier ruling in Sanjay Dalmia, where similar penalty was upheld for identical facts.
  • Deletion of protective assessment does not automatically nullify penalty proceedings for non-compliance of statutory notices.
  • No substantial question of law arose; hence, the appeals were dismissed.

Important Clarification

  • Non-compliance with notice under Section 142(1) independently attracts penalty, irrespective of outcome of assessment proceedings.
  • Consent/waiver form requirement is valid when linked to investigation of foreign assets.
  • Right to silence under Article 21 does not extend to tax compliance proceedings.
  • Even if additions are deleted on protective basis, procedural default can still invite penalty.

 Link to download the order -

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

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