2021 (4) TMI 91 - AT - Income Tax

Penalty u/s 271(1)(b) - assessment has been completed u/s 143(3) - Assessee has not complied to the statutory notice issued by the AO - ultimately the order has been passed u/s 143(3) - HELD THAT - Coordinate Benches of the Tribunal in a number of decisions have held that where the assessment order was finally passed u/s 143(3) and not u/s 144 of the Act due to subsequent compliance during the assessment proceedings, that would be considered as good compliance and the defaults committed earlier should be ignored and taking a lenient view the penalty u/s 271(1)(b) should not be levied. Further, the Coordinate Bench of the Tribunal in the case of one of the group member SMT. NEETU NAYYAR AND SMT. MEENA NAYYAR VERSUS ACIT, CENTRAL CIRCLE-20 NEW DELHI 2020 (12) TMI 1221 - ITAT DELHI has also deleted the penalty levied by the AO u/s 271(1)(b) and sustained by the Ld. CIT(A) under identical circumstances. Since the assessment in the instant case has ultimately been completed u/s 143(3) of the Act on the basis of various details filed by the assessee before the AO, therefore, considering the totality of the facts of the case it is not a fit case for levy of penalty u/s 271(1)(b) - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty u/s 271(1)(b) for non-compliance with notices.
2. Assessment completion under section 143(3) and its impact on penalty.
3. Adequacy of time provided for compliance with notice.
4. Precedent cases and their relevance.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty u/s 271(1)(b) for Non-Compliance with Notices:

The primary issue in both appeals was the confirmation of penalties levied under section 271(1)(b) of the Income Tax Act, 1961, for non-compliance with notices issued by the Assessing Officer (AO). Notices under sections 153A and 143(2) were issued, followed by a notice under section 142(1) along with a questionnaire. The assessee failed to comply with these notices, prompting the AO to issue a show-cause notice for penalty. Despite subsequent opportunities, the assessee did not provide the required details, leading to the imposition of penalties.

2. Assessment Completion under Section 143(3) and Its Impact on Penalty:

The assessee argued that since the assessment was ultimately completed under section 143(3), penalties should not be levied for non-compliance with specific notices. The Tribunal noted that the assessment was indeed completed under section 143(3) after the assessee eventually provided the necessary details. The Tribunal referenced several precedents where penalties were not upheld if the assessment was completed under section 143(3) due to subsequent compliance.

3. Adequacy of Time Provided for Compliance with Notice:

The assessee contended that the time provided to comply with the notice dated 16th October 2018 was insufficient. The Tribunal observed that the notice was dated 5th October 2018 but was dispatched on 16th October 2018. The AO had issued multiple notices and reminders, yet the assessee delayed compliance. The Tribunal considered the overall behavior of the assessee, noting a deliberate attempt to delay compliance, which hampered the AO's investigation.

4. Precedent Cases and Their Relevance:

The assessee cited several cases, including Chogori Distribution (P) Ltd vs. DCIT, Globus Infocom Limited vs. DCIT, and Akhil Bhartiya Prathmik Shikshak Sangh vs. Assistant Director of Income Tax, to argue that penalties should not be levied if the assessment is completed under section 143(3). The Tribunal found these precedents relevant and noted that in similar circumstances, penalties were deleted. The Tribunal also referenced its own decisions in the cases of Smt. Neetu Nayyar vs. ACIT and Smt. Meena Nayyar vs. ACIT, where penalties were deleted under identical circumstances.

Conclusion:

The Tribunal found merit in the assessee's arguments, particularly the completion of assessment under section 143(3) and the precedents set by similar cases. It concluded that the penalties under section 271(1)(b) should not be levied, as the eventual compliance by the assessee constituted good compliance. The Tribunal set aside the order of the CIT(A) and directed the AO to cancel the penalties for all assessment years in question. The appeals filed by the assessee were allowed, and the order was pronounced in the open court on 31/03/2021.