Tax penalty reduced from 70,000 to 20,000 due to procedural irregularities in assessment process

The Appellate Tribunal ITAT Delhi allowed the appeal of the assessee against the penalty imposed under section 271(1)(b) of the IT Act for AY 2005-06. The penalty of &8377; 70,000/- was reduced to &8377; 20,000/- by the CIT(A), and the Tribunal further held that it was not a fit case for penalty under section 271(1)(b) due to procedural irregularities in the assessment process. The appeal was allowed, and the decision was pronounced on 31st August, 2010.

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Issues involved: Appeal against penalty imposed u/s 271(1)(b) of the IT Act for AY 2005-06.

Summary:
The Appellate Tribunal ITAT Delhi heard an appeal filed by the assessee against the penalty imposed u/s 271(1)(b) of the IT Act for AY 2005-06. The penalty was imposed for seven non-compliances during the assessment proceedings. The CIT(A) deleted the penalty for five non-compliances as no show cause notice was issued for notice u/s 143(2), and also noted that penalty exceeding &8377; 20,000/- required prior approval of JCIT. The penalty of &8377; 70,000/- was reduced to &8377; 20,000/- by the CIT(A). The assessee further appealed against this reduction. The Revenue did not appeal against the deletion of penalty amounting to &8377; 50,000/-.

Upon review, the Tribunal found that various notices were issued by the AO within short intervals. The AO issued a notice u/s 143(2) on 28.2.2007, served on 1.3.2007 for a date on 5.3.2007, but the partner assumed it was inadvertently issued and did not appear. Similar situations occurred with other notices. The assessment was finally completed u/s 143(3) on 17.12.2007. Referring to a previous case, the Tribunal noted that where assessment was done u/s 143(2) and not u/s 144, subsequent compliance was considered good compliance, and earlier defaults were ignored. As the assessment in this case was completed u/s 143(3), the Tribunal held that it was not a fit case for penalty u/s 271(1)(b).

In conclusion, the appeal of the assessee was allowed, and the decision was pronounced on 31st August, 2010.

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