2024 (12) TMI 706 - AT - Income Tax

Penalty u/s 271(1)(b) - non-compliance of notice issued by the AO u/s 142(1) during reassessment proceedings, on account of Covid-19 pandemic - HELD THAT - Under the extra-ordinary circumstances, when the whole humanity across globe including India were suffering from Covid-19 pandemic, disease and deaths, and the lockdowns, the department ought to have taken a liberal view in condoning such default of non compliance of notice issued by the AO u/s 142(1) during reassessment proceedings, but it is unfortunate that the penalty was levied against the assessee by the AO which was later confirmed by ld. CIT(A). Keeping in view the facts and circumstances on record, delete the penalty levied by Assessing Officer against the assessee u/s 271(1)(b) which was later confirmed by ld. CIT(Appeals) as the assessee has shown reasonable cause for non compliance of notice issued by the AO u/s 142(1) during reassessment proceedings, and the case of the assessee is covered by Section 273B r.w.s. 271(1)(b), as section 271(1)(b) is subject to Section 273B. The assessee succeeds in this appeal. The appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(b) for non-compliance of notice u/s 142(1) during reassessment proceedings.

Analysis:
The appeal arose from the penalty order of Rs. 10,000/- imposed by the Assessing Officer under section 271(1)(b) for non-compliance of notice u/s 142(1) dated 30.09.2020 during the assessment year 2014-15. The assessee contended that the penalty was unjustified, lacked reasonable cause consideration, and violated principles of natural justice.

The assessee raised various grounds of appeal, including challenging the penalty order, arguing that the assessing officer erred in initiating penalty proceedings without considering the limitation period under section 275 of the Income Tax Act, 1961. The assessee also claimed that the penalty initiation was illegal and against natural justice principles.

During the reassessment proceedings, the assessee failed to comply with the notice u/s 142(1) issued by the AO, leading to the penalty imposition. The assessee's appeal before the CIT(Appeals) was dismissed, citing lack of reasonable cause for non-compliance during the Covid-19 pandemic. The CIT(Appeals) held that the extension of statutory filing dates did not exempt penalties for non-compliance.

Subsequently, the assessee filed a second appeal with the Tribunal, emphasizing the impact of the Covid-19 pandemic on non-compliance. The Tribunal noted the global crisis during the pandemic, including lockdowns and extensions of limitation periods by the Supreme Court and CBDT. The Tribunal acknowledged the reasonable cause for non-compliance due to the pandemic and the lack of response from the assessee during penalty proceedings.

The Tribunal found merit in the assessee's explanation for non-compliance during the pandemic, considering the global crisis and the extensions granted by the Supreme Court and CBDT. It concluded that the penalty imposition lacked justification and violated natural justice principles. Therefore, the Tribunal allowed the appeal, deleting the penalty of Rs. 10,000/- imposed by the Assessing Officer and confirmed by the CIT(Appeals).

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal and overturning the penalty under section 271(1)(b) for non-compliance of the notice u/s 142(1) during the reassessment proceedings for the assessment year 2014-15.