2022 (12) TMI 389 - AT - Income Tax

Penalty u/s. 271(1)(b) - no legal service of the notices - assessee failed to explain the reason for non-compliance of notices issued under section 142(1) - HELD THAT - As in the identical facts and circumstances the Delhi Tribunal in case of Smt. Rekha Rani 2015 (5) TMI 1100 - ITAT DELHI has decided the issue in favour of assessee in part by observing that penalty for the first default of non-compliance of notice under section 143(2)/142(1) of the Act was sufficient enough. As the assessment has been framed under section 143(3) read with section 263 of the Act but the assessee did not furnish the details called for by the AO during the assessment proceedings. Therefore the reference made by the learned counsel for the assessee to the order of the Delhi tribunal in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust 2007 (8) TMI 386 - ITAT DELHI-G cannot help the assessee. Appeal of the assessee is partly allowed.

Summary

Issues:
1. Appeal against penalty order under section 271(1)(b) of the Income Tax Act, 1961 for Assessment Year 2007-08.

Detailed Analysis:

1. Assessee's Grounds of Appeal:
The Assessee raised multiple grounds challenging the penalty order under section 271(1)(b) of Rs. 20,000. The grounds included contentions regarding legal service of notices, lack of statutory consideration, absence of cogent reasons, irrelevant considerations, and inadequate time provided. The Assessee also argued for no reasonable cause for penalty imposition and lack of opportunity during the appellate stage.

2. Main Issue Raised by Assessee:
The sole issue raised by the Assessee was the correctness of sustaining the penalty of Rs. 20,000 levied under section 271(1)(b) of the Act.

3. Factual Background:
The Assessee, an individual, failed to comply with notices issued under section 142(1) of the Act during the assessment proceedings. The Assessing Officer initiated penalty proceedings under section 271(1)(b) and imposed a penalty of Rs. 20,000 for non-compliance.

4. Assessment and Appeal:
The Assessee requested to keep the penalty in abeyance till finalization of the quantum appeal, but the request was denied by the AO. Subsequently, the penalty was confirmed by the learned CIT(A), leading to the Assessee appealing against the order.

5. Arguments Before ITAT:
During the appeal, the Assessee contended that substantial compliance was made during the assessment proceedings under section 143(3) read with section 263, implying that no penalty should be imposed.

6. ITAT Decision:
The ITAT referred to a similar case decided by the Delhi Tribunal and restricted the penalty to Rs. 10,000 for the first default of non-compliance with notices under section 143(2). The ITAT set aside the CIT(A)'s order and directed the AO to delete the penalty of Rs. 20,000, confirming a penalty of Rs. 10,000 only.

7. Conclusion:
The ITAT partly allowed the Assessee's appeal, emphasizing that penalty imposition should be restricted to the first default and not for each instance of non-compliance with notices. The ITAT's decision was based on the principle that penalty provisions are of a deterrent nature and not for repeated revenue generation. The ITAT's decision highlighted the importance of considering the circumstances of non-compliance before imposing penalties.