2016 (6) TMI 1304 - AT - Income Tax

Penalty u/s 271(1)(b) - order under Section 143(3) issued - Held that - We hold that the imposition of penalty u/s 271(1)(b) of the Act was patently wrong, specially in view of the fact that the impugned assessment order has been passed u/s 143(3). While setting aside the impugned order, we direct the Assessing Officer to delete the penalty. See Akhil Bhartiya Prathmik Shikshak Sangh Bhawan trust vs ACIT 2007 (8) TMI 386 - ITAT DELHI-G wherein held held that where an order under Section 143(3) has been issued and not under Section 144 of the Act, the same implies that the subsequent compliance in the assessment proceedings is considered as good compliance and defaults earlier committed were ignored by the AO. - Decided in favour of assessee

Summary

Issues:
Imposition of penalty under Section 271(1)(b) of the Income Tax Act, 1961 based on non-compliance with statutory notices during assessment proceedings.

Detailed Analysis:

1. Imposition of Penalty and Non-Compliance:
The appellant appealed against the penalty imposed under Section 271(1)(b) of the Income Tax Act, 1961, due to non-compliance with statutory notices during assessment proceedings. The AO issued multiple notices for compliance, but the assessee failed to represent or file any letter for adjournment on the specified dates. The AO subsequently imposed a penalty of ?10,000 for one instance of default. The appellant contested this penalty, claiming that their Authorized Representative (AR) visited the AO's office on various dates, but no hearings were conducted due to the AO's busy schedule.

2. Appellant's Arguments:
The appellant argued that the penalty was imposed arbitrarily and pointed out that the AR had appeared before the AO on several occasions, as acknowledged by the AO in the assessment order. Reference was made to a previous ITAT decision where subsequent compliance in assessment proceedings was considered good compliance, thus ignoring earlier defaults. The appellant contended that the penalty was unjustified given the AR's attempts to comply and the lack of valid reasons for non-compliance.

3. Revenue's Submission:
The Revenue argued that the AO had validly initiated the penalty under Section 271(1)(b) as the appellant failed to appear before the AO on multiple occasions without providing any reasonable cause for non-compliance. The Revenue contended that the AR's alleged visits without recording attendance were unsubstantiated, and the AO's workload was not a valid excuse for non-compliance during the specified dates.

4. ITAT Decision and Legal Precedent:
The ITAT, after considering the arguments and the precedent set by a Co-ordinate Bench in a similar case, held that the penalty imposed was incorrect. Citing the precedent, the ITAT emphasized that the mere initiation of a penalty does not confer jurisdiction without recording satisfaction in the assessment order. Additionally, since the assessment order was passed under Section 143(3) and not Section 144, subsequent compliance was deemed satisfactory, and earlier defaults were disregarded. Therefore, the ITAT set aside the penalty and directed the Assessing Officer to delete it.

5. Conclusion:
The ITAT allowed the appeal, ruling in favor of the appellant and ordering the deletion of the penalty imposed under Section 271(1)(b) of the Income Tax Act, 1961. The decision was based on the lack of valid grounds for the penalty, considering the appellant's attempts at compliance and the legal precedent regarding assessment proceedings and defaults.