2024 (6) TMI 940 - AT - Income Tax

Levy of penalty u/s 272A(1)(d) - non-compliance of notice u/s. 142(1) due to the Accountant's Covid-19 illness - unproved sundry creditors as brought to tax u/s 69A r.w.s. 115BBE(1) - HELD THAT - Assessee has responded to the final show cause notice which has resulted in passing the regular assessment order u/s. 143(3) r.w.s. 144B of the Act, during the faceless assessment proceedings. The assessee has explained that on going assessment proceedings came to know only after the receipt of penalty notice issued u/s. 272A(1)(d) - Since the assessee s Accountant was also not well past Covid-19 Pandemic situation, the assessee could not reply to the earlier statutory notices and filed its reply which has resulted in passing the regular assessment order dated 23.09.2022 u/s. 143(3) in the faceless regime. AO extracted the reply filed by the assessee that his Accountant suffering from Covid-19 ill health and his prolonged absence made the assessee not to file the details. Thereafter a new Accountant was engaged, with various difficulties collected the information and submitted before the assessing officer which are reproduced in Page No. 22 of the assessment order. Thus the assessee has been able to show reasonable cause for the failure to comply with statutory notices issued u/s. 142(1) - assessee has made reply to the final show cause notice with relevant materials and the assessing officer after considering the reply of the assessee, framed the assessment on 23.09.2022. Once the assessee has made compliance, though after some delay but it was well before the assessment order was framed, after considering the reply and documents filed by the assessee, then it does not fall in the category of non-compliance by the assessee at all. Hence, subsequent penalty levied by the Assessing Officer is not justified. Even otherwise, when this is the year of changing the mode of assessment proceedings from physical to digital/electronically, then the delay in compliance due to change in the mode of communication and proceedings is a bonafide reasons and not deliberate. Accordingly, the penalty levied by the Assessing Officer under section 272A(1)(d) is deleted. Assessee appeal allowed.

Summary

Issues Involved:
The appeal against the ex-parte appellate order confirming the penalty u/s 272A(1)(d) of the Income Tax Act, 1961 for the Assessment Year 2020-21.

Summary:
The Assessee, a firm engaged in Wholesale & Retail Trading, failed to respond to statutory notices u/s 142(1) of the Act due to the Accountant's Covid-19 illness. The Assessing Officer levied a penalty for non-compliance. The Assessee's appeal before the Ld. NFAC was dismissed for non-prosecution. The Assessee appealed, challenging the ex-parte order and penalty imposition.

Grounds of Appeal:
1. Lack of reasonable opportunity in passing the ex-parte order.
2. Disagreement with the penalty levied for non-compliance with notices.
3. Request for modification of appeal grounds.

Assessee's Argument:
The Assessee's counsel cited the Accountant's Covid-19 illness as the reason for non-compliance with initial notices. The Assessee responded to the final show cause notice, leading to a regular assessment order. The penalty imposition was deemed unjustified due to valid reasons beyond control.

Revenue's Argument:
The Revenue contended that no medical records were provided for the Accountant's illness. The Assessee's failure to represent before the Ld. CIT(A) resulted in an ex-parte order. The Revenue supported the penalty imposition for non-compliance with notices.

Judgment:
The Tribunal noted the Assessee's response to the final show cause notice after difficulties caused by the Accountant's illness. The Assessee's compliance before the assessment order was framed was considered valid. The delay in compliance during the transition to digital assessment was viewed as a genuine reason. Consequently, the penalty u/s 272A(1)(d) was deemed unjustified and deleted. The appeal by the Assessee was allowed.

Conclusion:
The penalty levied for non-compliance with notices was deleted, considering the valid reasons provided by the Assessee and the transition to digital assessment proceedings.