2025 (4) TMI 1481 - AT - Income Tax

Levy of penalty u/s 271(1)(b) - non-compliance of notice issued u/s 142(1) - HELD THAT - Hon ble Supreme Court in the case of Hindustan steel Ltd. 1969 (8) TMI 31 - SUPREME COURT has held that an order-imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. We have taken note of the fact that the assessee has ensured regular compliance of the statutory notices after August 2018. Thus it appears that the provisions of Section 271(1)(b) have been used by the AO as a deterrent to ensure timely compliance. We are satisfied with the reasons of non-compliance of the notice issued u/s 142(1) as there is no deliberate defiance of law or is guilty of conduct contumacious or dishonest or act in conscious disregard of the legal obligation. We therefore hereby set aside the impugned order and delete the penalty. Appeal of the assessee is allowed.

Summary

The Appellate Tribunal (ITAT Delhi) heard the assessee's appeal against the penalty of Rs. 10,000/- levied under section 271(1)(b) of the Income Tax Act, 1961, for alleged non-compliance with a notice dated 21.08.2018 issued under section 142(1). The assessee contended compliance with all statutory notices, including the show-cause notice dated 24.09.2018, which was responded to on 04.10.2018, arguing that the penalty was imposed without affording an opportunity of hearing, violating the principle of natural justice. The Additional Commissioner of Income Tax (Appeals) dismissed the appeal for delay without adjudicating merits.Relying on the Supreme Court's ruling in Hindustan Steel Ltd. (83 ITR 26), which held that penalty under section 271(1)(b) is quasi-criminal and requires deliberate defiance or dishonest conduct, the Tribunal found no such conduct by the assessee. The Tribunal noted the assessee's regular compliance post-August 2018 and held that the penalty was used merely as a deterrent for delayed compliance. Consequently, the Tribunal set aside the penalty order, stating: "there is no deliberate defiance of law or...conduct contumacious or dishonest or act in conscious disregard of the legal obligation." The appeal was allowed and the penalty of Rs. 10,000/- deleted.