2025 (3) TMI 92 - AT - Income Tax

Penalty levied u/s 271(1)(b) - failure of compliance to notice issued u/s. 142(1) - HELD THAT - It is seen from the list of Dates and Events the assessee sought for details for reasons for reopening of assessment however the same was not provided to the assessee in spite of reminders sent by the assessee. Assessee placed on record its rectification application filed u/s. 154 of the Act dated 06-02-2023 before the AO on the very same reopening of assessment and sanctioning obtained u/s.151 of the Act itself is bad in law. It is not on record any order is being passed against the rectification application. Regarding the hearing on 10-05-2023 the assessee sought for an adjournment for 10 days. Thus it is not the case of the assessee has not replied to the notices issued by the AO and failed to comply with the notices. Therefore A.O. was not correct in levying penalty u/s. 271(1)(b) - Appeal filed by the Assessee is allowed.

Summary

Issues Presented and Considered:1. Whether the penalty of Rs. 30,000 levied under section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with statutory notices issued by the Assessing Officer is justified.2. Whether the failure to comply with the notices issued under section 142(1) of the Act justifies the imposition of the penalty.Issue-Wise Detailed Analysis:Issue 1: Penalty under section 271(1)(b)- The Assessing Officer (AO) levied a penalty of Rs. 30,000 for non-compliance with statutory notices.- The assessee contended that there was no failure to comply with the notices and that the AO did not provide requested documents.- The CIT(A) confirmed the penalty, leading to the appeal.- The Tribunal found that the AO did not provide reasons for reopening the assessment despite repeated requests by the assessee.- The Tribunal noted that the rectification application filed by the assessee was not addressed, and an adjournment was sought for a hearing.- The Tribunal concluded that the penalty was unjustified and canceled it.Issue 2: Failure to comply with notices under section 142(1)- The AO alleged failure to comply with notices issued under section 142(1) on specific dates.- The assessee argued that there was no non-compliance on their part and that the penalty was vague and non-specific.- The Tribunal observed that the assessee sought reasons for reopening the assessment, which were not provided despite reminders.- The Tribunal also noted the rectification application filed by the assessee, which was not addressed by the AO.- The Tribunal found that the penalty was not warranted as the assessee had not failed to respond to the notices.- Consequently, the Tribunal allowed the appeal, canceling the penalty.Significant Holdings:- The Tribunal found that the AO's decision to levy a penalty under section 271(1)(b) was incorrect due to the lack of compliance with statutory notices and failure to provide requested documents.- The Tribunal concluded that the penalty was unjustified and canceled it, allowing the appeal filed by the assessee.Overall, the Tribunal held that the penalty imposed for non-compliance with statutory notices was unwarranted, as the assessee had not failed to respond to the notices and had sought reasons for the assessment reopening, which were not provided by the AO. The Tribunal, therefore, canceled the penalty of Rs. 30,000 levied under section 271(1)(b) of the Income Tax Act, 1961.