2024 (9) TMI 358 - AT - Income Tax

Penalty levied u/s 272A(1)(d) - non-compliance with documentary evidences, which the appellant assessee failed - restriction to prevailing COVID-19 situation/restriction in the country - HELD THAT - Coming to present case, when the whole world was in the grip of devastating pandemic, it is not only astonishing but hard to believe that the tax authorities holding quasi-judicial position were unaware of then prevailing COVID-19 situation/restriction in the country. In such a global life threating situation it could never be said that the appellant was frivolously sleeping over his duty in the garb of COVID-19 Pandemic. In the extant appeal, the appellants failure to furnish information/documents during the course of pendency of re-assessment proceedings prima-facie in our considered view is attributable to subsistence of COVID-19 which utterly prevented the assessee from complying with such notices effectively. Revenue s action in mulcting the penalty by asking the assessee to prove the reasonable cause COVID- 19 with documentary evidence capable of suggesting non-application of mind by the tax authorities. The prevailing COVID-19 restriction/situation in view of Hon ble Apex Court decision 2022 (1) TMI 385 - SC ORDER requires no provement. The COVID-19 restriction r.w. Hon ble apex court order (supra) de-facto in our considered view is sufficient to form a reasonable cause for the purpose of section 273B of the Act so as to exculpate the assessee s non-compliance from attracting any penalty u/s 272A(1)(d) of the Act. We set-aside the impugned order and delete the penalty as unwarranted. The solitary ground thus stands allowed.

Summary

Issues:
Challenge to penalty imposed under section 272A(1)(d) of the Income Tax Act for assessment year 2017-18 due to non-compliance with information/document requests during COVID-19 pandemic.

Detailed Analysis:

1. The appellant challenged the penalty imposed under section 272A(1)(d) of the Income Tax Act for the assessment year 2017-18. The National Faceless Appeal Centre confirmed the penalty imposed by the Income Tax Officer for the appellant's failure to provide information/documents in response to notices issued under section 142(1) of the Act during the COVID-19 pandemic.

2. The appellant did not appear for the hearing, leading to the proceedings being conducted ex-parte. The Revenue argued that the appellant failed to establish a reasonable cause for non-compliance with the notices issued during the pandemic, resulting in the penalty imposition.

3. The Revenue invoked penalty provisions after the appellant's non-compliance with the notices, citing lack of evidence to support the claim of COVID-19 as a reasonable cause. The appellant's appeal to the National Faceless Appeal Centre was unsuccessful, leading to the present challenge.

4. The Tribunal proceeded ex-parte due to the appellant's absence and considered the arguments presented by the Revenue. The Tribunal examined the facts of the case in light of the law to make a decision on the penalty imposition.

5. It was undisputed that the appellant failed to comply with the notices issued under section 142(1) of the Act during the COVID-19 pandemic. The Revenue imposed the penalty for this failure and emphasized the lack of evidence to prove the existence of the pandemic during the notice period.

6. The Tribunal noted that the appellant's failure to provide documentary evidence of the COVID-19 situation during the notice period led to the penalty imposition. The appellant's inability to prove a reasonable cause for non-compliance was a crucial factor in sustaining the penalty.

7. The Tribunal highlighted the significance of section 273B of the Act, which exempts penalties if a reasonable cause is proven. The COVID-19 pandemic was acknowledged as a reasonable cause, and the Tribunal emphasized that the appellant's non-compliance during the pandemic should not attract a penalty.

8. Considering the global impact of the COVID-19 pandemic and the restrictions imposed by the government, the Tribunal found it implausible that the tax authorities were unaware of the situation. The Tribunal concluded that the appellant's failure to comply with the notices was justifiable due to the prevailing COVID-19 circumstances.

9. In light of the above analysis, the Tribunal set aside the penalty imposed on the appellant, deeming it unwarranted due to the reasonable cause of the COVID-19 pandemic. The appeal was allowed, and the penalty was deleted.

This detailed analysis comprehensively covers the issues raised in the judgment, providing a thorough examination of the legal arguments and reasoning behind the decision to set aside the penalty imposed on the appellant.