2021 (1) TMI 638 - AT - Income Tax

Penalty u/s 271(1)(b) - non-compliance of notice u/s 142(1) - HELD THAT - Assessee was non-cooperative and in default so as to attract penalty under section 271(1)(b) - In the case laws relied upon by assessee cited ITAT held that when an assessment was made under section 143(3) and not under section 144 subsequent compliance in the assessment proceedings was considered as good compliance so as to mitigate one single instance of default committed earlier, and ignored by the AO while framing assessment under section 143(3), levy of penalty under section 271(1)(b) is not justifiable. We do not find any compelling reasons to impose penalty under section 271(1)(b) and therefore, we delete the same and cancel the orders of the Revenue s authorities passed under section 271(1)(b). Appeal of the assessee is allowed.

Summary

Issues:
Appeal against confirmation of penalty under section 271(1)(b) of the Income Tax Act, 1961.

Analysis:
The appeal was against the penalty confirmation under section 271(1)(b) of the Income Tax Act, 1961. The assessee's case was selected for scrutiny assessment under section 143(2) after declaring a total loss. The penalty of ?10,000 was imposed for non-compliance with a notice issued under section 142(1) of the Act. The assessee contended that the non-compliance was due to misplacement by the clerk, but all required details were submitted during the assessment proceedings. The ld.AO noted this in the assessment order under section 143(3). The counsel argued that since the assessment was finalized based on the details submitted, there was no default on the part of the assessee to attract penalty under section 271(1)(b). The counsel cited relevant case laws to support this argument.

Upon considering the submissions, it was noted that the assessee's representative attended the hearing and provided necessary details during the assessment proceedings, leading to the finalization of assessment under section 143(3). The AO recorded this fact in the assessment order, indicating cooperation from the assessee. Citing the case laws referred to by the counsel, it was established that subsequent compliance during assessment proceedings after initial default could mitigate the default. Therefore, in this case, there was no justification for imposing a penalty under section 271(1)(b). Consequently, the penalty was deleted, and the orders of the Revenue authorities were canceled.

In conclusion, the appeal of the assessee was allowed, and the penalty under section 271(1)(b) of the Act was deleted. The decision was pronounced in court on 27th November 2020 at Ahmedabad.