2023 (3) TMI 763 - AT - Income Tax

Penalty u/s. 271(1)(b) - assessee though not complied to the 142(1) notices - assessment order passed u/s.144 - reasonable cause for the said failure u/s 273B - HELD THAT - As before completion of assessments the assessee filed various details vide its letters dated 05.11.2018 16.11.2018 07.12.2018 19.12.2018 and 20.12.2018. However submissions were not taken on record by the Assessing Officer and passed a best judgment assessment. Whereas when the assessee has filed so many details AO ought not have passed the assessment order u/s. 144 of the Act but ought to have passed the assessment order u/s. 143(3) of the Act. As stated by the assessee during the appellate proceedings the entire additions made u/s. 144 assessment order is deleted by the CIT(A). Thus the grievance made out by the assessee is found to be genuine and reasonable. In the above circumstances the levy of penalty under Section 271(1)(b) in our considered opinion is unwarranted. If the statutory provision shows that the word shall has been used in Section 271(1)(b) then the imposition of penalty would have been mandatory. Section 273B as noted further throws light on the legislative intent as it specifically provides that no penalty shall be imposed if the assessee proves that there was reasonable cause for the said failure . - Decided in favour of assessee.

Summary

Issues:
- Appeal against the levy of penalty under section 271(1)(b) of the Income Tax Act, 1961 for Assessment Year 2016-17.

Detailed Analysis:

Issue 1: Penalty u/s. 271(1)(b) for non-compliance of notice under section 142(1)
- The assessee, a construction firm, failed to file details in response to 142(1) notices due to the absence of their Accountant.
- The Assessing Officer (A.O.) imposed a penalty of Rs. 50,000 for not replying to the notices.
- The Commissioner of Income Tax (Appeals) upheld the penalty, citing non-furnishing of details.
- The assessee contended that the penalty should be deleted as the Accountant's absence was the reason for non-compliance.
- The Tribunal noted that although the assessee did not respond to the notices, they later submitted various details before assessment completion.
- The Tribunal found the penalty unwarranted as the Assessing Officer should have passed the assessment order under section 143(3) instead of section 144 considering the submissions made by the assessee.
- Citing Section 271(1)(b) and 273B, the Tribunal held that the penalty was discretionary and not automatic, and deleted the penalty as there was a reasonable cause for the failure to comply.

Issue 2: Applicability of Section 273B for penalty imposition
- Section 273B states that no penalty shall be imposed if there was a reasonable cause for the failure.
- The Tribunal emphasized that the legislative intent was clear that penalties should not be imposed if a reasonable cause is proven.
- It was noted that the word "shall" in Section 273B indicates that penalties are not mandatory if a reasonable cause is established.
- By applying Section 273B, the Tribunal concluded that the penalty under Section 271(1)(b) was unjustified and therefore deleted.

Conclusion:
- The Tribunal allowed all five appeals filed by the assessee against the penalty imposed under section 271(1)(b) for non-compliance with notices under section 142(1) for the Assessment Year 2016-17.
- The Tribunal held that the penalty was unwarranted due to the reasonable cause for non-compliance and the Assessing Officer's failure to pass the assessment order under the appropriate section.