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Issues involved: Assessment u/s.144, Penalty u/s. 271(1)(b), Penalty u/s. 271(1)(c)
Assessment u/s.144: The appellant challenged the assessment made by the AO u/s.144 of the Act for the Asstt. year 2004-05. The AO completed the assessment u/s.144 as there was no proper compliance from the assessee's end, determining the income at &8377; 5,66,400/-. The ld. CIT(A) upheld the action of the AO and dismissed the assessee's appeal. However, the ITAT found that there was a reasonable cause for the assessee's non-appearance during the assessment proceedings. Therefore, the ITAT set aside the impugned order and remitted the matter back to the AO for framing the assessment afresh after allowing a reasonable opportunity of being heard to the assessee. Penalty u/s. 271(1)(b): The AO imposed a penalty of &8377; 40,000/- on the assessee u/s. 271(1)(b) for non-compliance with the notices issued. However, the ITAT, after accepting the reasonable cause for non-appearance during assessment proceedings, set aside the penalty imposed under sec. 271(1)(b) in view of the overriding effect of sec. 273B over sec. 271(1)(b) of the Act. Consequently, the penalty was ordered to be deleted. Penalty u/s. 271(1)(c): The AO imposed a penalty of &8377; 2,03,196/- u/s. 271(1)(c) in respect of the additions made in the assessment u/s.144. The ld. CIT(A) upheld the penalty. However, since the order for the quantum proceedings was set aside for a de novo assessment, the penalty imposed based on the original assessment could not stand. The ITAT set aside the penalty and restored the matter to the AO for considering the imposition of penalty pursuant to the fresh assessment, citing the judgment of the Hon'ble Supreme Court in Mohd. Mohatram Farooqui Vs. CIT.
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