2021 (2) TMI 395 - AT - Income Tax

Penalty u/s 271(1B) - non-compliance of the notice u/s 142(1) - HELD THAT - We find from the records that a remand report dated 31.05.19 was furnished to the ld. CIT(A) by the ld. A.O wherefrom it appears that where the submission of the reply by the assessee relating to the penalty order u/s 271(1B) was filed wherein the assessee categorically mentioned that the permanent established of the assessee is at Ranchi and the details of the business are maintained in the said city further that there is no established at Kolkata. It appears that the assessee has complied with the notice u/s 142(1) of the Act though late as evident from the records before us. Therefore no penalty in the instant case is called for. As we rely upon the judgment passed by the Hon ble Apex Court in the case of Hindustan Steel Ltd. vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT where it was held that penalty should not be imposed unless the assessee acted deliberately - we set aside the order passed by the ld. CIT(A) and direct the Assessing Officer to delete the penalty. The common order. passed by the ld. CIT(A) in all appeals is set aside. - Decided in favour of assessee.

Summary

Issues Involved:

1. Imposition of penalty under Section 271(1B) of the Income Tax Act, 1961.
2. Compliance with notice under Section 142(1) of the Income Tax Act, 1961.
3. Validity of penalty imposition in light of the assessee's delayed compliance.
4. Applicability of the Supreme Court judgment in Hindustan Steel Ltd. vs. State of Orissa.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1B) of the Income Tax Act, 1961:

The assessee challenged the imposition of a penalty of ? 10,000/- under Section 271(1B) of the Income Tax Act for non-compliance with a notice under Section 142(1) dated 28.11.2017. The penalty proceedings were initiated, and a notice was issued on 29.12.2017 due to the assessee's non-compliance during the assessment proceedings. Despite the final hearing being re-fixed on 18.05.2018, the assessee did not respond, leading to the imposition of the penalty.

2. Compliance with Notice under Section 142(1) of the Income Tax Act, 1961:

The records indicated that a remand report dated 31.05.2019 was submitted to the Commissioner of Income Tax (Appeals) [CIT(A)] by the Assessing Officer (A.O.). The report revealed that the assessee had eventually complied with the notice under Section 142(1), albeit belatedly. The submission clarified that the assessee's permanent establishment was in Ranchi, and business details were maintained there, not in Kolkata.

3. Validity of Penalty Imposition in Light of the Assessee's Delayed Compliance:

The tribunal found that the assessee had complied with the notice, though late. Given this compliance, the tribunal concluded that no penalty was warranted in this case. The tribunal emphasized that the penalty should not be imposed merely due to late compliance if the compliance was eventually made.

4. Applicability of the Supreme Court Judgment in Hindustan Steel Ltd. vs. State of Orissa:

The tribunal relied on the Supreme Court judgment in Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC), which held that "penalty should not be imposed unless the assessee acted deliberately." The judgment stated that an order imposing penalty is a quasi-criminal proceeding and should not be imposed unless there is deliberate defiance of law, contumacious or dishonest conduct, or conscious disregard of statutory obligations. The tribunal found that in the present case, the assessee did not act in deliberate defiance of the law, and therefore, penalty imposition was not justified.

Conclusion:

Respecting the Supreme Court's judgment, the tribunal set aside the order passed by the CIT(A) and directed the Assessing Officer to delete the penalty. The common order passed by the CIT(A) in all the appeals was set aside, and the assessee's appeals were allowed. The order was pronounced in the open court on 16.12.2020.