2021 (3) TMI 5 - AT - Income Tax

Penalty u/s. 271(1)(b) - there is a default and non- compliance on the part of the assessee to the notice issued u/s. 142(1) - unexplained source of deposit made in the bank account - AO as also stated that the assessee has not made compliance to the show cause notice issued u/s. 271(1)(b) - HELD THAT - That cannot be a ground for imposition of penalty u/s. 271(1)(b) of the Act. In the quantum appeal, the ld. CIT(A) vide its order dated 22.09.2020 has deleted the addition made by the Assessing Officer and therefore, it amounts to acceptance of the explanation of the assessee filed during the assessment proceedings. Hence, in the facts and circumstances of the case and in view of Section 273B of the Act when the assessee has finally complied with the notice issued by the Assessing Officer the penalty is not imposable as the explanation filed by the assessee was finally found to be correct and accepted in the quantum appeal. Consequently the penalty levied u/s. 271(1)(b) of the Act is deleted. - Decided in favour of assessee.

Summary

Issues involved:
1. Penalty imposed under section 271(1)(b) of the Income Tax Act, 1961 for the AY 2011-12.
2. Compliance with notices issued during assessment proceedings.
3. Validity of penalty imposition based on non-compliance with notices.

Detailed Analysis:
Issue 1: The appeal was against the penalty order under section 271(1)(b) of the Income Tax Act, 1961 for the AY 2011-12. The assessee contested the penalty, arguing it was unjustified both factually and legally. The Assessing Officer had imposed a penalty of ?10,000, which the assessee sought to have revoked.

Issue 2: The Assessing Officer had issued notices to the assessee during the assessment proceedings, particularly under section 142(1) of the Act. The assessee, although delayed, eventually responded to these notices by furnishing the required details regarding cash deposits. The ld. CIT(A) also acknowledged the compliance by the assessee in the quantum appeal, where the addition made by the Assessing Officer was deleted based on the explanation and details provided by the assessee.

Issue 3: The dispute arose regarding the non-compliance with the notices issued during the assessment proceedings. The ld. DR argued that the belated reply filed by the assessee did not constitute compliance, especially after a show cause notice was issued by the Assessing Officer. However, the tribunal noted that the Assessing Officer had dropped the proceedings under section 144 and framed the assessment under section 143(3) after the assessee's reply, indicating a level of compliance.

In the final analysis, the tribunal considered the submissions from both sides and reviewed the relevant material on record. It noted that the Assessing Officer had acknowledged the assessee's compliance with the notices issued during the assessment proceedings. The tribunal also highlighted that the ld. CIT(A) had deleted the addition made by the Assessing Officer in the quantum appeal, indicating acceptance of the explanation provided by the assessee. Consequently, the tribunal concluded that since the assessee had ultimately complied with the notice issued by the Assessing Officer, the penalty under section 271(1)(b) was unwarranted. Therefore, the tribunal allowed the appeal filed by the assessee, leading to the deletion of the penalty.