2022 (6) TMI 1239 - AT - Income Tax

Penalty u/s 271(1)(b) - non-compliance of Income Tax Notice - six reminders on different dates were also issued by the AO for filing return of income but the assessee failed to file return - no response from the side of the assessee even as when AO initiated penalty proceedings u/s 271(1)(b) of the Act for the failure of the assessee to comply with notice - HELD THAT - As obsereved in the identical facts and circumstances, the Delhi Tribunal has decided the issue in favour of assessee in part in the case of Smt. Rekha Rani 2015 (5) TMI 1100 - ITAT DELHI by observing that penalty for the first default of non-compliance of notice under section 142(1) of the Act was sufficient enough. Thus we set aside the order of Ld. CIT(A) and direct the AO to delete the penalty to the tune of ₹ 20,000/- and confirm the penalty of ₹ 10,000/-only. Hence, this ground of assessee s appeal is partly allowed.

Summary

Issues:
1. Delay in filing the appeal by the assessee.
2. Imposition of penalty under section 271(1)(b) of the Income Tax Act, 1961.

Issue 1: Delay in filing the appeal by the assessee

The appeal was filed by the Assessee against the order of the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre, which was delayed by 87 days. The Assessee, an agriculturist residing in a village, cited lack of knowledge about computer and tax laws as the reason for the delay. The delay was condoned by the Tribunal after the Departmental Representative raised no objection. Consequently, the Tribunal proceeded to adjudicate the appeal on merit.

Issue 2: Imposition of penalty under section 271(1)(b) of the Income Tax Act, 1961

The Assessee was penalized under section 271(1)(b) for non-compliance with notices issued by the Assessing Officer regarding filing returns of income. Despite multiple reminders and notices, the Assessee failed to respond or comply. The penalty of Rs. 30,000/- was imposed for each default committed by the Assessee. The Assessee contended before the Commissioner of Income Tax (Appeal) that the penalty should be deleted, arguing that reasonable cause was not considered. However, the Commissioner upheld the penalty, noting that the Assessee only disputed the addition made on merit during the appellate proceeding, without addressing the penalty proceedings.

In a similar case, the Delhi Tribunal had ruled that penalty under section 271(1)(b) could not be imposed for each notice of non-compliance, as it would defeat the legislative intent and serve as a deterrent rather than a revenue-earning measure. The penalty was restricted to the first default of non-compliance. Following this precedent, the Appellate Tribunal in Ahmedabad set aside the Commissioner's order and directed the Assessing Officer to delete the penalty of Rs. 20,000/-, confirming a penalty of Rs. 10,000/- only. Consequently, the Assessee's appeal was partly allowed.

In conclusion, the Appellate Tribunal's judgment addressed the issues of delay in filing the appeal and the imposition of penalty under section 271(1)(b) of the Income Tax Act, 1961. The Tribunal condoned the delay in filing the appeal due to valid reasons provided by the Assessee. Additionally, the Tribunal followed a precedent set by the Delhi Tribunal to restrict the penalty to the first default of non-compliance, thereby partially allowing the Assessee's appeal.