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2023 (8) TMI 923 - AT - Income TaxPenalty levied u/s 271(1)(b) - failure of the assessee to comply with notices - default committed by the assessee - HELD THAT - Delhi Tribunal has decided the issue in favour of assessee in part in the case of Smt. Rekha Rani 2015 (5) TMI 1100 - ITAT DELHI by observing that penalty for the first default of non-compliance of notice under section 142(1) of the Act was sufficient enough. Thus direct the AO to delete the penalty and confirm the penalty of ₹ 10,000/-only.
Issues involved:
The appeal against the penalty order u/s 271(1)(b) of the Income Tax Act 1961 for Assessment Year 2016-17. Issue 1: Penalty imposed under section 271(1)(b) of the Act The Assessee, a private limited company, failed to respond to notices issued u/s 142(1) of the Act during scrutiny assessment proceedings. The Assessing Officer (AO) initiated penalty proceedings u/s 271(1)(b) of the Act and imposed a penalty of Rs. 50,000 for non-compliance. The Assessee contended that they did not receive the notices and had no intention to not comply. The Learned CIT(A) confirmed the penalty. Issue 2: Interpretation of penalty provision The Appellate Tribunal noted a similar case decided by the Delhi Tribunal where it was held that imposing a penalty for each instance of non-compliance with notices under section 142(1) was not the intention of the legislature. The Delhi Tribunal restricted the penalty to the first default, emphasizing that the penalty provision is deterrent in nature. Following this precedent, the Appellate Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty of Rs. 40,000, confirming a penalty of Rs. 10,000 only. In conclusion, the Appellate Tribunal partially allowed the Assessee's appeal, following the principle that penalty under section 271(1)(b) should be restricted to the first default of non-compliance with notices. The penalty was reduced from Rs. 50,000 to Rs. 10,000 based on the interpretation of the penalty provision as a deterrent measure rather than a revenue-earning mechanism.
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