2021 (9) TMI 296 - AT - Income Tax

Levy of penalty u/s 271(1)(b) for non-compliance to the notice issued u/s 142(1) - HELD THAT - It is an undisputed fact that the assessment order for A.Y. 2015-16 has been passed u/s 143(3) - We find in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust 2007 (8) TMI 386 - ITAT DELHI-G has held that when the order is passed u/s 143(3) of the Act and not under section 144 of the Act, it would mean that subsequent compliance in assessment proceedings are considered to be a good compliance and defaults committed earlier are ignored by Assessing Officer and in such circumstances, there could be no reason to come to the conclusion that the default was willful. We find that the facts in the case under consideration to be identical to that of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust (supra) and in such a situation, we relying on the aforesaid decision held that penalty imposed u/s 271(1)(b) of the Act was not warranted more so, when the assessment order has been passed u/s 143(3) - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(b) for non-compliance with notice u/s 142(1) of the Act.

Analysis:

Issue 1: Levy of penalty under section 271(1)(b) for non-compliance with notice u/s 142(1) of the Act

The case involved an appeal filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) relating to Assessment Year 2015-16. The assessee, a company engaged in transportation and delivery services, had filed its return of income but was penalized by the Assessing Officer under section 271(1)(b) for non-compliance with a notice u/s 142(1) of the Act. The CIT(A) upheld the penalty, leading to the appeal before the ITAT.

During the proceedings, the assessee argued that they had attended before the AO on various dates, as noted in the assessment order, and that subsequent compliance in assessment proceedings was considered good compliance under section 143(3) of the Act. The assessee relied on the decision of the Tribunal in a similar case to support their argument that no penalty should be levied in such circumstances.

On the other hand, the Revenue contended that penalty under section 271(1)(b) could be imposed for each instance of default, and since no reasonable cause was found for the non-compliance, the penalty was justified according to the provisions of the Act.

After considering the submissions, the ITAT observed that when an order is passed under section 143(3) of the Act and subsequent compliance is considered good, defaults committed earlier are ignored. Relying on a previous decision of the Tribunal, the ITAT held that in the absence of willful default, the penalty under section 271(1)(b) was not warranted. Consequently, the ITAT set aside the penalty order and directed the AO to delete the penalty, allowing the appeal of the assessee.

In conclusion, the ITAT found in favor of the assessee, emphasizing that in cases where compliance was achieved during assessment proceedings, penalties for earlier defaults should not be imposed, especially when the assessment order was passed under section 143(3) of the Act.

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