2022 (9) TMI 1420 - AT - Income Tax

Tribunal Rules in Favor of Assessee, Cancels Penalties for Tax Years, Emphasizing Pandemic Impact

The Tribunal ruled in favor of the assessee, deleting penalties imposed under Section 271(1)(b) for AY 2012-13 to 2016-17 and Section 272A(1)(d) for AY ... Penalty under Section 271(1)(b) - penalty under Section 272A(1)(d) - sufficient cause under Section 273B - adjournment and waiver of cause of action - assessment completed under Section 143(3) r.w.s. 153A/153C - principle of consistency in penalty treatmentPenalty under Section 271(1)(b) - sufficient cause under Section 273B - adjournment and waiver of cause of action - assessment completed under Section 143(3) r.w.s. 153A/153C - Validity of penalty levied under Section 271(1)(b) for AY 2012-13 to 2016-17 - HELD THAT: - The Tribunal found that the assessee sought and was granted adjournments in response to the notice dated 02/12/2020, with hearings rescheduled to 01/01/2021 and 11/01/2021; once the Assessing Officer himself allowed adjournments, the cause of action for non-compliance stood waived. The assessee also made full compliance during assessment proceedings and the assessments were completed under Section 143(3) r.w.s. 153A/153C accepting the returned income without variation. The Tribunal held that the assessee had shown sufficient cause within the meaning of Section 273B and that the Commissioner (Appeals) ought to have deleted the penalty rather than uphold part of it; coordinating decisions of the Tribunal recognising that framing assessment under Section 143(3) after compliance mitigates earlier bonafide defaults were considered in support. [Paras 10, 11, 12, 13]Penalty under Section 271(1)(b) for AY 2012-13 to 2016-17 deleted.Penalty under Section 272A(1)(d) - principle of consistency in penalty treatment - Validity of penalty levied under Section 272A(1)(d) for AY 2017-18 and 2018-19 - HELD THAT: - The Tribunal noted that the provisions of Section 272A(1)(d) are pari materia with Section 271(1)(b) and that the penalties for these years were levied for the same alleged non-compliance (notice dated 02/12/2020) as in the earlier years. Applying the principle of consistency and having deleted the penalties under Section 271(1)(b) for the earlier years, the Tribunal directed deletion of the penalties under Section 272A(1)(d) for AY 2017-18 and 2018-19 as well. [Paras 14]Penalty under Section 272A(1)(d) for AY 2017-18 and 2018-19 deleted.Final Conclusion: All appeals are allowed and the penalties imposed for AY 2012-13 to 2018-19 are deleted. Issues:- Validity of penalty under Section 271(1)(b) of the Income Tax Act for AY 2012-13 to 2016-17- Validity of penalty under Section 272A(1)(d) of the Income Tax Act for AY 2017-18 and 2018-19Analysis:Validity of penalty under Section 271(1)(b) for AY 2012-13 to 2016-17:The appeals challenged the penalty levied under Section 271(1)(b) of the Income Tax Act. The Assessing Officer issued notices for non-compliance, leading to the penalty imposition. The assessee argued compliance during assessment, attributing non-compliance to pandemic-related delays. The CIT(A) upheld a reduced penalty, prompting the appeal to the Tribunal. The Tribunal found the assessee's explanations valid, citing the completion of assessment under Section 143(3) as crucial. It noted the pandemic's impact on compliance and the Assessing Officer's allowance of adjournments, leading to the penalty's deletion for sufficient cause shown.Validity of penalty under Section 272A(1)(d) for AY 2017-18 and 2018-19:The Assessing Officer imposed penalties under Section 272A(1)(d) for alleged non-compliance, mirroring earlier years' issues. The Tribunal, considering consistency, deleted these penalties alongside those under Section 271(1)(b). It emphasized the importance of prior decisions and the lack of cause for penalties due to pandemic-related challenges. The Tribunal's decision favored the assessee, leading to the allowance of all appeals.This judgment highlights the significance of valid reasons for non-compliance, especially in exceptional circumstances like a pandemic. It underscores the need for authorities to consider genuine explanations and the impact of external factors on compliance timelines. The Tribunal's decision showcases a fair and just approach in interpreting tax penalty provisions, ensuring a balanced application of the law while considering practical challenges faced by taxpayers.