2023 (2) TMI 1114 - AT - Income Tax

Penalty levied u/s 271(1)(b) - assessee failed to comply notice u/s 142(1) - scope of bonafide reason - HELD THAT - Division Bench of Delhi Tribunal in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust 2007 (8) TMI 386 - ITAT DELHI-G held that where assessee had not complied with notice under Section 142(1) but assessment order was passed under Section 143(3) and not under Section 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty under Section 271(1)(b) was not justified. As find that similar view was followed in a series of decisions as has been relied by the ld. AR for the assessee in his submission. Thus, considering the fact that assessment in the present case was completed u/s 153A/143(3) in accepting return of income, find that it was sufficient compliance, merely because the assessee could not make compliance due to some bonafide reason, no penalty under Section 271(1)(b) of the Act could be levied on the assessee. In view of aforesaid factual and legal position, direct the Assessing Officer to delete the entire remaining impugned penalty. In the result, ground of appeal raised by assessee is allowed.

Summary

Issues involved:
- Challenge to penalty levied under Section 271(1)(b) and Section 272A(1)(d) of the Income Tax Act, 1961.
- Compliance with notice under Section 142(1) of the Act.
- Consideration of penalty for non-compliance during the Covid-19 pandemic.
- Interpretation of subsequent compliance in assessment proceedings.
- Discretionary power of the Commissioner to restrict penalty amount.

Analysis:

1. Challenge to Penalty Levied:
- The appeals were against penalty orders under Section 271(1)(b) and Section 272A(1)(d) for different assessment years.
- The appellant contested the penalty citing reasons for non-compliance and seeking deletion of the penalty.
- The ld. CIT(A) partially upheld the penalty considering the circumstances and compliance by the appellant.
- The Tribunal ultimately deleted the penalties based on the facts and legal positions presented.

2. Compliance with Notice under Section 142(1):
- The Assessing Officer initiated penalties for non-compliance with notices under Section 142(1) of the Act.
- The appellant argued that delays were due to the Covid-19 pandemic and requested leniency based on the circumstances.
- The ld. CIT(A) and the Tribunal considered the appellant's explanations and compliance in their decisions.

3. Penalty Consideration during Covid-19 Pandemic:
- The appellant highlighted the impact of the pandemic on their ability to respond to notices and requested relief.
- The ld. CIT(A) and the Tribunal acknowledged the exceptional circumstances and adjusted the penalties accordingly.

4. Interpretation of Subsequent Compliance:
- The Tribunal analyzed the subsequent compliance by the appellant during the assessment proceedings.
- Previous decisions were cited to support the argument that subsequent compliance should be considered as good compliance.

5. Discretionary Power of the Commissioner:
- The Tribunal examined the discretionary power of the Commissioner to restrict the penalty amount.
- It was concluded that the penalty amount sustained by the ld. CIT(A) was not in line with the provisions of Section 271(1)(b) and directed deletion of the penalty.

6. Overall Decision:
- The Tribunal reviewed similar cases and decided to delete the penalties imposed under Section 271(1)(b) and Section 272A(1)(d) for all the assessment years in question.
- The appeals were allowed, and the penalties were overturned based on the circumstances and legal interpretations presented during the proceedings.

This detailed analysis covers the issues involved in the legal judgment, highlighting the key arguments, considerations, and decisions made by the authorities and the Tribunal.