2022 (9) TMI 837 - AT - Income Tax

Penalty levied u/s. 271(1)(b) - assessee firm could not comply with the notices issued u/s. 142(1) - main submission of the assessee is that the assessing officer has given only 15 days time to respond to the notices which is inadequate - HELD THAT - CIT(A) has confined the levy of penalty u/s. 271(1)(b) very particularly to the notices which has issued and served on the assessee, wherein the assessee failed to comply/reply to the notices. Thus the ld. CIT(A) partially deleted the penalty levied against the assessee, wherein notices have been served to the assessee beyond the date of hearing or service of notices is not proved by the ld. A.O. Thus literally only one proper notice was served to the assessee, wherein adequate time is not given to the assessee to file its reply. Further as explained by the assessee, non-response to the notice is because of disputes between the Partners, considering the facts of the present case, the levy of penalty u/s. 271(1)(b) is liable to be deleted. - Decided in favour of assessee.

Summary

Issues:
1. Penalty u/s. 271(1)(b) of the Income Tax Act, 1961 for non-compliance with statutory notices.
2. Adequacy of time given to respond to notices.
3. Impact of disputes between partners on non-compliance.
4. Assessment of penalty by the Assessing Officer and CIT(A).

Analysis:

Issue 1: Penalty u/s. 271(1)(b) for non-compliance
The appeals were filed against orders confirming penalties under section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with statutory notices for Assessment Years 2012-13 and 2013-14. The Assessing Officer initiated penalty proceedings due to the assessee's failure to respond to notices issued under sections 142(1) and 143(2) of the Act.

Issue 2: Adequacy of time to respond
The assessee argued that the 15-day time given to respond to notices was inadequate, leading to non-compliance. The appellant contended that the short response time was unreasonable, citing relevant case laws to support the argument that penalties should not be levied under such circumstances.

Issue 3: Impact of partner disputes on non-compliance
The assessee explained that disputes between partners hindered their ability to participate in assessment proceedings, resulting in non-compliance with the notices. The contention was that the non-response was not intentional but a consequence of internal conflicts, requesting the penalty to be deleted based on this ground.

Issue 4: Assessment of penalty
The CIT(A) partially allowed the appeals, reducing the penalties based on the service and response to specific notices. The CIT(A) considered the dates and proof of service of notices, limiting the penalties to instances where notices were duly served and not responded to by the assessee. The tribunal concurred with the CIT(A)'s decision, noting that penalties should be levied only when notices were properly served and not complied with, ultimately allowing the appeals and deleting the penalties imposed on the assessee.

In conclusion, the tribunal allowed both appeals filed by the assessee, emphasizing that penalties should be imposed only when notices are duly served and not responded to, considering the specific circumstances of the case, including the disputes between partners affecting compliance.