2018 (6) TMI 302 - AT - Income Tax

Penalty u/s. 271(1)(b) - failure to comply with the initial two notices given u/s 143 - good compliance - Held that - It is true that assessee has physical disability, restricting his movements. He has authorised the AR to appear before the AO, who complied with the notices subsequently. Even though there was failure to comply with the initial two notices given, considering that AO has completed assessment u/s. 143(3) and not u/s. 144, the subsequent compliance can be considered as good compliance for the earlier notices given. The initial non-compliance may not result in levy of penalty, as assessee has bonafide reasons for non-compliance. AO issued only one notice and levied two penalties for non-compliance on two dates. Technically speaking, each non-compliance requires separate show-cause notice/proceeding and AO cannot levy two penalties in one single proceeding - Decided in favour of assessee.

Summary

Issues:
1. Levy of penalty under section 271(1)(b) of the Income Tax Act for non-compliance with notices.
2. Consideration of physical disability as a factor in non-compliance.
3. Interpretation of subsequent compliance as 'good compliance' for earlier defaults.
4. Validity of levying multiple penalties for non-compliance on different dates in a single proceeding.

Analysis:
1. The case involved an appeal against the penalty imposed under section 271(1)(b) of the Income Tax Act for non-compliance with notices issued during scrutiny proceedings. The Assessing Officer (AO) initiated penalty proceedings after the assessee failed to respond to the notices issued on different dates. The penalty was confirmed by the Commissioner of Income Tax (Appeals), leading to the appeal before the Appellate Tribunal.

2. The assessee contended that the non-compliance was due to physical disability and that the authorized representative could not attend the proceedings. Despite complying with subsequent notices and completing the assessment under section 143(3) of the Act, the penalty was upheld. The Tribunal considered the physical disability of the assessee as a valid reason for non-compliance and interpreted subsequent compliance as 'good compliance' for the earlier defaults.

3. The Tribunal referred to previous decisions where subsequent compliance in assessment proceedings was considered as good compliance, leading to the defaults committed earlier being ignored. Citing the case of Gloubs Infocom Limited Vs. DCIT and Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust Vs. ACIT, the Tribunal held that the initial non-compliance may not warrant the levy of a penalty if there were genuine reasons for the non-compliance.

4. Additionally, the Tribunal noted a technical flaw in the penalty proceedings where the AO issued only one notice but levied two penalties for non-compliance on different dates. It was advised that each non-compliance should require a separate show-cause notice and proceeding, and multiple penalties cannot be levied in a single proceeding. The Tribunal allowed the appeal of the assessee and canceled the penalty, emphasizing the importance of following proper procedures to avoid technical defects in penalty proceedings.