2022 (8) TMI 1187 - AT - Income Tax

Penalty u/s. 271(1)(b) - As per AO assessee has not complied with the notice issued u/s 143(2) as neither anybody appeared nor adjournment application was received by the AO - AY 2015-16 - HELD THAT - From the assessment order itself, it is clear that in compliance to the notices issued under section 143(2)/142(1) Sh. Ajeet Kumar Sarraf FCA and Sh. A.C. Bharadwaja, Advocate appeared from time to time and filed reply and details as well as produced bills and vouchers. These details and evidence produced by the assessee were also examined by the AO at length. Thus, from the assessment order, it is manifest that there was a due compliance by the assessee to the notices issued under section 143(2)/142(1) of the Act and further the AO has also not recorded any satisfaction in the assessment order for initiating the penalty under section 271(1)(b) - Thus the penalty levied by the Assessing Officer under section 271(1)(b) for the assessment year 2015-16 is not justified and the same is deleted. AY - 2016-17 - AO levied the penalty for non compliance of the notice issued under section 143(2) and 143(1). The Assessing Officer has not specified in the order as against which notice, whether issued under section 143(2) or 143(1), the penalty was levied. We further note that in the assessment order, the Assessing Officer has recorded the fact that in compliance to notice under section 142(1), the assessee furnished reply online alongwith audit report under section 44AB computation of income, balance-sheet , profit loss account and details of interest claimed during the year. The assessee also furnished the details regarding monthly opening and closing stock as well as ledger copy of interest paid and interest received. After considering these details and explanation filed by the assessee in compliance to the notice issued under section 142(1), the Assessing Officer framed the assessment of return of income. Thus, it is clear that initially there was no compliance on behalf of the assessee to the notice issued under section 143(2) and 142(1) of the Income Tax Act but subsequently, the assessee furnished its reply along-with audit report as well as all the requisite details as recorded by the AO in the assessment order - AO was satisfied with the reply as well as the details and record produced by the assessee. Therefore, though the assessee made the compliance belatedly but it was prior to the assessment order and the Assessing Officer was satisfied with the reply and supporting evidence produced by the assessee and consequently the assessment was framed on the returned income. - Decided in favour of assessee.

Summary

Issues:
1. Penalty under section 271(1)(b) for non-compliance of notice under section 143(2) for assessment years 2015-16 and 2016-17.

Analysis:

Assessment Year 2015-16:
The appellant challenged the penalty imposed under section 271(1)(b) for non-compliance with the notice under section 143(2). The appellant argued that they had fully complied with all notices issued by the Assessing Officer, as evidenced by the details provided and bills produced. The appellant contended that the penalty was unjustified. The Assessing Officer's penalty order stated non-compliance with the notice, but the assessment order confirmed compliance with the notices. The Tribunal noted that representatives of the appellant appeared, filed replies, and produced evidence in response to the notices. As per the assessment order, due compliance was evident, and no satisfaction was recorded for initiating the penalty. Consequently, the penalty for the assessment year 2015-16 was deemed unjustified and deleted.

Assessment Year 2016-17:
For this assessment year, the appellant challenged the penalty under section 271(1)(b) for non-compliance with the notice under section 143(2). The appellant argued that the Assessing Officer had accepted their reply and explanation during the assessment proceedings, leading to no additions in the assessment order. The appellant maintained that the penalty was unwarranted. The Assessing Officer initiated penalty proceedings citing non-compliance with notices under sections 143(2) and 142(1). The penalty order indicated that the appellant failed to comply with the statutory notices, leading to the penalty imposition. However, the Tribunal observed that although there was initial non-compliance, the appellant later furnished replies and details, which were accepted by the Assessing Officer before the assessment order. The compliance, albeit belated, was considered satisfactory, resulting in the deletion of the penalty under section 271(1)(b) for the assessment year 2016-17.

In conclusion, both appeals by the assessee were allowed, and the penalties imposed for non-compliance with notices under section 143(2) were deleted. The Tribunal found that in both assessment years, the appellants had ultimately complied with the notices, which were accepted by the Assessing Officer, rendering the penalties unjustified.