2020 (3) TMI 710 - AT - Income Tax

Penalty u/s 271 (1 )(b) - assessment was completed under Section 143(3) by the AO - HELD THAT - The fact that the assessment has been competed under Section 143(3) of the Act is not in dispute. The Tribunal in the case of Logicladder Tech Pvt. Ltd. 1771379 has cancelled the penalty under section 271(1)(b) of the Act on the ground that the assessment was completed under Section 143(3). In the case of Globus Infocom Ltd 2016 (6) TMI 1304 - ITAT DELHI also the penalty laid u/s 271(1)(b) of the Act has been deleted where assessment is completed under Section 143(3) - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the penalty under Section 271(1)(b) of the Income-tax Act, 1961.
2. Whether non-compliance was deliberate or due to reasonable cause.
3. Whether the appellant received the show-cause notice under Section 274 r.w.s. 271.

Issue-wise Detailed Analysis:

1. Legitimacy of the penalty under Section 271(1)(b) of the Income-tax Act, 1961:
The appellant argued that the penalty under Section 271(1)(b) should not be upheld as the assessment order was passed under Section 143(3) instead of Section 144, implying that subsequent compliances were considered as good compliance. The Tribunal agreed with this argument, citing previous decisions where penalties were canceled when assessments were completed under Section 143(3). The Tribunal referenced cases such as Logicladder Tech Pvt. Ltd. Vs. Income Tax Officer and Globus Infocom Ltd. Vs. DCIT, which supported the view that penalties should not be levied when the assessment is completed under Section 143(3).

2. Whether non-compliance was deliberate or due to reasonable cause:
The appellant contended that non-compliance was not deliberate but due to reasonable cause beyond their control. They argued that delays were caused by the Assessing Officer's late provision of necessary documents. However, the learned CIT(A) rejected this contention, stating that the appellant failed to comply with notices without reasonable cause. The Tribunal, however, found merit in the appellant's argument that they were prevented by sufficient cause, as subsequent compliance was acknowledged in the assessment order.

3. Whether the appellant received the show-cause notice under Section 274 r.w.s. 271:
The appellant claimed that they did not receive the show-cause notice under Section 274 r.w.s. 271, and thus, the penalty was imposed without giving them a reasonable opportunity to be heard. The learned CIT(A) rejected this claim, noting that the notice was dispatched via speed post and acknowledged receipt was mentioned. The Tribunal did not find sufficient grounds to dispute the CIT(A)'s finding on this issue.

Conclusion:
The Tribunal, considering the assessment was completed under Section 143(3) and the precedents set by similar cases, decided to cancel the penalty levied under Section 271(1)(b). The appeals for the assessment years 2005-06, 2010-11, and 2012-13 were allowed, and the penalties were canceled. The decision emphasized that subsequent compliance in assessment proceedings should be considered good compliance, negating the need for penalties.

Order:
All three appeals of the assessee were allowed, and the penalties were canceled. The order was pronounced in the open court on 7th January 2020.