ITAT Delhi quashes penalties for non-compliance with tax notice

The ITAT Delhi set aside penalty orders imposed under section 271(1)(b) for non-compliance with a notice under section 142(1) of the Income Tax Act, 1961 for assessment years 2005-06 to 2011-12. The appellant's argument, based on unreasonable time given to respond and judicial precedent, was accepted. Considering cooperation in previous assessments, the non-compliance was deemed inapplicable. Following Co-ordinate Benches' decisions, the penalty orders were quashed, and the appeals were allowed on 28th November 2014.

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Issues:
Penalty imposed under section 271(1)(b) for non-compliance with notice under section 142(1) of the Income Tax Act, 1961.

Analysis:
The seven appeals were filed against the penalty imposed under section 271(1)(b) for the assessment years 2005-06 to 2011-12. The penalty was confirmed by the CIT(A) based on the non-compliance of the assessee with the notice dated 19.11.2012 issued under section 142(1) of the Income Tax Act, 1961. The assessee failed to attend or provide the required information, leading to the imposition of a penalty of Rs. 10,000 for each year, which was upheld by the CIT(A).

The appellant argued that similar penalties imposed in connected cases were quashed by different Benches of the ITAT. They contended that the assessments were completed under section 143(3), and the short time given to respond to 34 questions was unreasonable. The appellant relied on various orders of Co-ordinate Benches to support their case.

After considering the submissions and the record, it was noted that the AO provided only six days to respond to detailed questions, and the actual service date of the notice was missing in the penalty order. As the assessments were completed under section 143(3), indicating cooperation with the AO, the non-compliance with the notice was viewed in light of previous assessments. Citing judicial precedent, it was held that subsequent compliance in assessment proceedings was considered good compliance, and the earlier defaults were ignored by the AO. Following the precedent set by Co-ordinate Benches, the impugned orders were set aside, and the penalty orders were quashed. The appeals of the assessee were allowed.

The judgment was pronounced on 28th November 2014 by the ITAT Delhi, with the penalty orders being set aside based on the peculiar facts and circumstances of the case and the legal precedent established by previous decisions.

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