2022 (10) TMI 396 - AT - Income Tax

Validity of penalty levied u/s 271(1)(b) - Whether assessee has shown sufficient cause within the meaning of Section 273B in response to reply of show cause notice? - HELD THAT - AO finalised the assessment order on 07/06/2021. While finalizing the assessment order no variation in the returned income was made thus accepted the return income. The assessment was completed under Section 143(3) r.w.s. 153C - AO before levying penalty issued notice u/s 274 r.w.s. 271(1)(b) dated 23/01/2021. In response to said show cause notice the assessee specifically submitted that there is Covid-19 pandemic and everybody is doing work with safety measures and that his Accountant were busy in audit work. The reply of assessee was not accepted. AO levied penalty for non-compliance of notice dated 03/12/2020. The assessee has shown sufficient cause within the meaning of Section 273B in response to reply of show cause notice therefore no penalty u/s 271(1)(b) of the Act was leviable and the assessee is liable to succeed on this ground alone. The notice dated 03/12/2020 was issued to the assessee. In response to said notice the assessee sought adjournment on 28/12/2020. The adjournment was allowed to assessee and on the request of assessee the hearing of the case was fixed on 04/01/2021. Once the AO himself allowed adjournment the cause of action for non-compliance was waived on that moment itself. CIT(A) while confirming the action of AO proceeded one step further and held that the assessee committed two defaults. In our view the observation of ld. CIT(A) is contrary to the record and with the contents of order of penalty u/ 271(1)(b) of the Act. The assessee has shown sufficient cause for non-compliance moreover such non-compliance was done by granting adjournment by the AO himself. Considering the decision in various case laws relied by assessee wherein it was held that when the assessment was framed u/s 143(3) merely because the assessee could not make compliance for single hearing due to bonafide reason on the penalty u/s 271(1)(b) of the Act cannot be imposed on the assessee for such bonafide default due to reasons beyond his control - we direct the AO to delete the impugned penalty. In the result ground of appeal raised by assessee is allowed.

Summary

Issues:
- Challenge to penalty levied under Section 271(1)(b) for AY 2012-13 to 2016-17
- Challenge to penalty levied under Section 272A(1)(d) for AY 2017-18 and 2018-19

Analysis:
1. Penalty under Section 271(1)(b) for AY 2012-13:
- The appellant challenged the penalty for non-compliance of a notice under Section 142(1) of the Income Tax Act.
- The Assessing Officer issued the penalty based on the appellant's failure to comply with the notice and subsequent show cause notice.
- The appellant argued that the delay was due to Covid-19 pandemic and work constraints, which should be considered as a valid reason.
- The CIT(A) upheld the penalty, considering the defaults as willful and deliberate.
- The Tribunal found that the appellant had shown sufficient cause for non-compliance and directed the Assessing Officer to delete the penalty.

2. Penalty under Section 271(1)(b) for AY 2013-14 to 2016-17:
- The facts were similar to the AY 2012-13 case, and penalties were levied for the same reasons.
- Following the decision in the AY 2012-13 case, the penalties for these years were also deleted.

3. Penalty under Section 272A(1)(d) for AY 2017-18 and 2018-19:
- The Assessing Officer levied penalties under Section 272A(1)(d) for alleged non-compliance of notices.
- Considering the consistency principle and the deletion of penalties in earlier years, the Tribunal also deleted these penalties.

4. Overall Decision:
- The Tribunal allowed all appeals of the assessee, directing the deletion of penalties for various assessment years.
- The Tribunal emphasized the importance of showing sufficient cause for non-compliance and considered the impact of Covid-19 pandemic on work arrangements.
- The decisions were based on legal precedents and the specific circumstances of each case, ensuring fair treatment and adherence to statutory provisions.