2023 (2) TMI 1089 - AT - Income Tax

Validity of penalty levied u/s 271(1)(b) - non-compliance of notice u/s 142(1) - HELD THAT - CIT(A) while confirming the action of Assessing Officer held that no submission is filed before him despite affording reasonable opportunity. As in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust 2007 (8) TMI 386 - ITAT DELHI-G held that where assessee had not complied with notice u/s 142(1) but assessment order was passed u/s 143(3) and not u/s 144 that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and therefore penalty u/s 271(1)(b) was not justified. Similar view was followed in a series of decisions as has been relied by assessee in his submission. Thus considering the fact that assessment in the present case was completed u/s 153A/143(3) in accepting return of income find that it was sufficient compliance merely because the assessee could not make compliance for single hearing due to some bonafide reason on the penalty u/s 271(1)(b) - AO in the assessment order recorded that the assessee made compliance of notice at the same time he has levied penalty for default of the same notice. Even otherwise if it is considered that the assessing officer might have committed mistake while recording various dates of notice subsequent compliance is sufficient and no penalty is sustainable in the present case - we direct the AO to delete the impugned penalty. In the result ground of appeal raised by assessee is allowed.

Summary

Issues:
- Validity of penalty under Section 271(1)(b) for AY 2013-14 to 2016-17
- Validity of penalty under Section 272A(1)(d) for AY 2017-18 to 2019-20

Analysis:

Validity of penalty under Section 271(1)(b) for AY 2013-14 to 2016-17:
The appellant challenged the penalty levied under Section 271(1)(b) for non-compliance of a notice under Section 142(1) of the Income Tax Act. The Assessing Officer initiated the penalty citing non-compliance with the notice, leading to the appellant filing an appeal before the ld. CIT(A). The ld. CIT(A) upheld the penalty, considering the appellant a habitual defaulter. However, the appellant argued that full compliance was made during assessment, and the penalty lacked a cause of action as no variation was made in the returned income. The appellant also cited multiple decisions supporting their argument that subsequent compliance in assessment proceedings negated earlier defaults. The Tribunal agreed, noting that the penalty was levied before the assessment order, and there was no reference to non-compliance in the order. The Tribunal found that the appellant's compliance was sufficient, leading to the direction to delete the penalty.

Validity of penalty under Section 272A(1)(d) for AY 2017-18 to 2019-20:
For AY 2017-18 to 2019-20, the Assessing Officer levied penalties under Section 272A(1)(d) for alleged non-compliance of a notice, which was not referred to in the assessment order. The Tribunal, observing the similarity between Section 272A(1)(d) and Section 271(1)(b), deleted the penalties for these years as well. The principle of consistency was applied in deleting the penalties under Section 272A(1)(d) for both years.

In conclusion, the Tribunal allowed all appeals of the assessee, directing the deletion of penalties for non-compliance in various assessment years. The Tribunal emphasized the importance of proper recording of compliance and satisfaction before levying penalties, ensuring fairness in the assessment process.