2022 (9) TMI 1420 - AT - Income Tax

Validity of penalty levied u/s 271(1)(b) - non-compliance of notice u/s 142(1) - as per assessee default is due to Covid-19 pandemic - HELD THAT - We find that the Assessing Officer finalised the assessment order on 24/08/2021 under section 143(3) r.w.s. 153A. While finalizing the assessment order, no variation in the returned income or assessed income was made in four assessment orders. Moreover, the assessment was completed under Section 143(3) r.w.s. 153C of the Act. We find that before ld CIT(A) the assessee specifically contended that there was severe Covid-19 pandemic during the relevant period and everybody is doing work with safety measures and that his Accountant were busy in audit work. The submissions of assessee was not accepted as bonafide explanation with the scope of section 273B. Though, the Assessing Officer levied penalty for two default, however, the ld CIT(A) restricted it to one default only. In our view, the assesse has shown sufficient cause within the meaning of Section 273B in his submissions before ld CIT(A) and the ld CIT(A) ought to have accepted the same. In our view the assessee has shown sufficient cause within the scope of section 273B of the Act. The notice dated 02/12/2020 was issued to the assessee. In response to said notice, the assessee sought adjournment on 14/12/2020. The adjournment was allowed to assessee and on the request of assessee, the hearing of the case was fixed on 01/01/2021 and again for 11.01.2021. In our view, once AO himself allowed adjournment, the cause of action for non-compliance was waived on that moment itself. In our view, the action of ld. CIT(A) in confirming the penalty for one default is also liable to be set aside. Assessee has shown sufficient cause for noncompliance before ld CIT(A). The ld CIT(A) was having co-terminus power thus, he ought to have deleted the entire penalty levied under section 271(1)(b) or 272A(1)(d). We find that the assessee has relied on various case laws, wherein coordinate benches of Tribunal have taken view that when the assessment was framed under Section 143(3), merely because the assessee could not make compliance for single hearing due to bonafide reason on the penalty under Section 271(1)(b) of the Act cannot be imposed on the assessee for such bonafide default due to reasons beyond his control. In view of aforesaid factual and legal position, we direct the Assessing Officer to delete the impugned penalty. In the result, ground of appeal raised by assessee is allowed. Penalty under Section 272A(1)(d) - We noted that the provisions of Section 272A(1)(d) of the Act are pari materia with the provisions of Section 271(1)(b) - AO levied the penalty for alleged non-compliance of notice dated 02/12/2020 as levied in earlier years which we have already deleted. Therefore, considering the principle of consistency, the penalty under Section 272A(1)(d) of the Act for both the years are also deleted.

Summary

Issues:
- Validity of penalty under Section 271(1)(b) of the Income Tax Act for AY 2012-13 to 2016-17
- Validity of penalty under Section 272A(1)(d) of the Income Tax Act for AY 2017-18 and 2018-19

Analysis:

Validity of penalty under Section 271(1)(b) for AY 2012-13 to 2016-17:
The appeals challenged the penalty levied under Section 271(1)(b) of the Income Tax Act. The Assessing Officer issued notices for non-compliance, leading to the penalty imposition. The assessee argued compliance during assessment, attributing non-compliance to pandemic-related delays. The CIT(A) upheld a reduced penalty, prompting the appeal to the Tribunal. The Tribunal found the assessee's explanations valid, citing the completion of assessment under Section 143(3) as crucial. It noted the pandemic's impact on compliance and the Assessing Officer's allowance of adjournments, leading to the penalty's deletion for sufficient cause shown.

Validity of penalty under Section 272A(1)(d) for AY 2017-18 and 2018-19:
The Assessing Officer imposed penalties under Section 272A(1)(d) for alleged non-compliance, mirroring earlier years' issues. The Tribunal, considering consistency, deleted these penalties alongside those under Section 271(1)(b). It emphasized the importance of prior decisions and the lack of cause for penalties due to pandemic-related challenges. The Tribunal's decision favored the assessee, leading to the allowance of all appeals.

This judgment highlights the significance of valid reasons for non-compliance, especially in exceptional circumstances like a pandemic. It underscores the need for authorities to consider genuine explanations and the impact of external factors on compliance timelines. The Tribunal's decision showcases a fair and just approach in interpreting tax penalty provisions, ensuring a balanced application of the law while considering practical challenges faced by taxpayers.